A subtle unease has crept into markets as the narrative of smooth progress collides with evidence that momentum may be faltering. In recent weeks the air of confidence surrounding richly valued equities has given way to something more tentative, a recognition that lofty multiples leave little room for disappointment.
The spotlight has inevitably turned back to the United States, where equity indices trade at significant premiums to historic averages. That position has been justified by resilient earnings in a handful of dominant companies, yet the backdrop is beginning to show cracks. The latest labour market data revealed only modest job creation, accompanied by downward revisions to prior months. Such signals hint at a cooling economy just as investors have become comfortable pricing in aggressive rate cuts.
This tension is sharpened by seasonality. September has rarely been kind to investors, with the S&P 500 historically registering its weakest monthly returns. Although history does not dictate the present, the weight of expectation can influence behaviour at the margin, amplifying caution at a time when valuations already demand perfection. Add in the persistent noise of political instability across several G7 economies and the picture becomes one of mounting fragility.
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