“September Curse” Broken? Wall Street Buzzing with Optimism: U.S. Stocks Set to Climb Higher
With the Federal Reserve announcing its first rate cut of the year, U.S. stocks surged to all-time highs last week, sparking what some strategists call a short-term “honeymoon rally.”
Optimism around looser financial conditions and the AI boom has propelled the market upward, seemingly shattering the “September curse” of historically weak stock performance.
Wall Street is buzzing with enthusiasm again. Strategists from Wells Fargo, Barclays, and Deutsche Bank have recently raised their S&P 500 targets, pointing to strong earnings, the AI investment wave, and the Fed’s easier monetary policy as the foundation for the market’s next leg up.
Bank of America strategist Michael Hartnett told clients that even if this is a bubble, it’s not ready to pop yet. His team studied over a century of market manias and found that past bubbles typically saw an average 244% rally from trough to peak.
By that measure, the “Magnificent Seven” tech stocks, up 223% since their March 2023 low, may still have room to run.
Jeff Krumpelman, chief investment strategist at Mariner Wealth Advisors, agrees. He argues that AI-driven productivity gains and solid earnings outlooks justify higher valuations.
In a recent interview, he said, “We’re still early in the AI game. It’s opening up tons of opportunities and driving productivity that boosts overall revenue and keeps the labor market strong.”
Krumpelman noted that the S&P 500’s valuation is around 23 times forward earnings, high by historical standards, but he thinks comparing it to past cycles misses the point.
“This isn’t your grandpa’s S&P 500,” he said. “Back when communication services and tech growth stocks weren’t the focus, returns on equity and profit margins were naturally much lower.”
Warnings Linger
Krumpelman also raised concerns about the economy overheating: “What worries me is a real ‘melt-up’—that’d make me nervous. People are getting a bit wild about Fed rate cuts, and that could push us even higher.”
A “melt-up” happens when investors, afraid of missing out on gains, pile into the market without fundamental changes, leading to a surge in bullish sentiment, skyrocketing prices, and potentially a market crash.
Other market veterans share this unease. Wall Street stalwart Ed Yardeni, president of Yardeni Research, recently warned that loose monetary policy could spark an unstable rally without fixing structural issues like U.S. labor shortages. He believes rate cuts in a still-healthy economy might fuel speculative excess driven by FOMO rather than fundamentals, often ending in sharp pullbacks.
Emily Roland, co-chief investment strategist at John Hancock Investment Management, called the current environment unusually favorable but fragile.
Even the bulls admit risks lie ahead. Citigroup, Fundstrat, and Evercore ISI have warned that high valuations, thinning market breadth, and rising tech volatility could make the near term rocky, even if the AI-driven long-term bull market holds strong.