September Volatility Looms as Jobs Report Nears

Good Morning Investors,

Hope everyone had a great Labor Day weekend. I enjoyed watching college football roar back to life, with some huge matchups setting the tone for the season. No better way to ease out of summer than a bit of gridiron chaos and over-analysis of every quarterback decision.

But now it's Tuesday, markets are moving, and we're diving headfirst into what's shaping up to be a pivotal month. September brings us a critical jobs report that could reshape Fed policy, mounting questions about central bank independence, and the seasonal volatility that historically makes this the worst month for equities. Add in corporate breakups, private capital making aggressive moves, and Treasury yields spiking on tariff uncertainty, and we've got plenty to unpack. Let's get the newsletter on track and dive into what's driving markets this week.

US stock futures are lower to kick off September, with the S&P 500 ($SPY ( ▲ 0.61% )) down 0.8%, Nasdaq ($QQQ ( ▲ 0.84% )) 1% lower, and Dow ($DIA ( ▲ 0.08% )) off 0.6%. Yields are spiking across the curve – 10-year at 4.29% and 30-year nearing 5% – following a US court ruling that could force the government to refund Trump-era tariffs. With potential refunds of $172.1 billion on the table, the fiscal implications are significant, particularly as the deficit looms larger.

Gold briefly hit a record high above $3,500, while silver surged to its highest level in 14 years, both driven by haven flows and expectations of a Fed cut this month. Oil prices are steady amid Ukraine-Russia supply concerns, but investors are clearly bracing for more volatility as economic uncertainty and political pressure mount.

September's History Looms

September is historically the worst month for equities – down 0.7% on average going back to 1950, but the recent track record is even worse. Over the past five years, the S&P 500 has averaged a 4.2% drop in September, compared to a 2% average decline over the last decade. That seasonal pattern may well play out again as markets digest rising yields, corporate restructurings, and mounting political drama around the Fed.

Fed in Flux – Independence Under Fire

We're at a pivot point for monetary policy, but bigger questions about Fed governance are stealing the spotlight. The jobs report Friday will be pivotal, especially after July's sharply revised data and Trump's abrupt firing of BLS commissioner Erika McEntarfer. Expectations are for 73,000 jobs added and unemployment ticking up to 4.3%. Any material downside surprise will firm up bets on a September cut.

Meanwhile, the Fed's independence faces unprecedented challenges. Lisa Cook's lawsuit against her firing remains in legal limbo after Friday's court hearing ended without a ruling. Trump's nominee Stephen Miran has his Senate hearing Thursday, likely adding another dovish voice to the board. The central bank's credibility – not just its interest rate path – is now front and center for market participants.

International Yields Surge

The Treasury selloff isn't happening in isolation. European yields are spiking to levels not seen in over a decade, with 30-year yields in Germany, France, and the Netherlands hitting their highest since 2011. UK 30-year gilt yields jumped to levels last seen in 1998. This global bond rout adds another layer of complexity to Fed policy decisions.

Kraft Heinz Splits Apart

Kraft Heinz ($KHC ( ▲ 0.84% )) will split into two public companies: Global Taste Elevation Co. (housing Heinz, Philadelphia, and Kraft Mac & Cheese) with $15.4B in net sales, and North American Grocery Co. (Oscar Mayer, Kraft Singles, Lunchables) with $10.4B in sales. The breakup reverses much of the 2015 mega-merger and joins a wave of consumer brand restructurings aimed at unlocking value. It's also an admission that the Berkshire Hathaway and 3G Capital deal – which Warren Buffett later said was overpaid – has run its course.

Air Lease Goes Private

Air Lease will be taken private in a $7.4B cash deal ($65/share) by a consortium including Sumitomo, SMBC Aviation Capital, Apollo, and Brookfield. The deal values the aircraft lessor at $28.2B including debt and signals private capital's aggressive push into hard-asset plays with reliable cash flows.

Intel Gets CHIPS Act Cash Early

Intel ($INTC ( ▼ 1.77% )) amended its CHIPS Act funding deal to receive $5.7 billion in cash ahead of schedule, removing earlier project milestones. In exchange, Intel issued 274.6 million shares to the US government and granted options for another 240.5 million shares. The revised agreement maintains restrictions on dividends, buybacks, and certain international expansions.

Amazon Prime Sign-Up Miss

Despite doubling Prime Day to four days, Amazon ($AMZN ( ▲ 1.64% )) fell short on US sign-ups, registering 3.9 million new members in the three weeks prior – 185,000 fewer than 2024 and 193,000 below internal targets. Consumer engagement may be flagging as subscription fatigue sets in, despite the extended promotional period.

Tesla's China Struggles Continue

China-made EV sales fell 4% year-over-year in August for Tesla ($TSLA ( ▲ 0.07% )), following July's 8.4% decline. The company launched its six-seater Model Y L at 339,000 yuan to counter fierce local competition, particularly from BYD. European sales routs continue in most markets, though Norway, Spain, and Portugal showed resilience.

Private Capital Goes Shopping

Beyond Air Lease, Apollo is reportedly launching a $5 billion sports investment vehicle, targeting lending to leagues and teams plus direct stakes in clubs. Meanwhile, Boeing booked a 30-aircraft order from Macquarie AirFinance, bringing the firm's 737 MAX order book to 70 planes for delivery through 2032.

Tech Partnerships in Focus

Meta ($META ( ▲ 0.69% )) is exploring partnerships with Google and OpenAI to enhance AI features across its applications. Discussions include integrating Google's Gemini model for Meta AI conversational responses and leveraging OpenAI models for social media AI features. Any deals would likely be temporary bridges until Meta's own models advance further.

Tuesday:

• ISM Manufacturing PMI (49 expected, 48 prior)

• Construction Spending July (-0.1% expected)

• Zscaler (ZS), NIO (NIO) earnings

Wednesday:

• JOLTS job openings (7.23M expected)

• Fed Beige Book release

• Salesforce, Figma, Macy’s, Campbell’s earnings

Thursday:

• ADP private payrolls (+70K expected)

• ISM Services PMI (50.5 expected)

• Stephen Miran Senate Banking Committee hearing

• Broadcom, Lululemon, DocuSign earnings

Friday:

• August Jobs Report (+73K expected)

• Unemployment Rate (4.3% expected)

• Average Hourly Earnings (+0.3% MoM, +3.8% YoY expected)

Still Like Equal Weight

I reduced tech exposure on August 13th due to extended positioning and valuation and that still holds. Equal-weight S&P 500 offers better diversification and will benefit if this market continues to broaden. Tech should still lead into year-end, but not without a healthy pause first.

Small and Midcaps Remain Attractive

Heavy short positioning in small-caps makes them ripe for a squeeze, especially with rate cut narratives building. If we get a cutting cycle, even one that starts slowly, these names will re-rate quickly. The asymmetric risk-reward here is compelling, given how beaten down small caps have been and how a more dovish Fed into 2026 could drive outperformance.

Re-engaging with International

We were overweight international early this year, pared back in April's selloff, but are now looking to reallocate. The dollar chart is rolling over, and the valuation gap between US and non-US equities remains wide. With reduced FX headwinds, international equities could quietly outperform over the next few quarters.

The bull market is still intact, but we've entered a new phase. September is about consolidation, not collapse. Earnings remain strong, the labor market is softening just enough to justify a cut, and corporate positioning stays supportive. But stretched valuations, political noise around the Fed, and seasonal headwinds demand a more tactical mindset.

I expect the Fed to cut in September with hawkish guidance – that's your volatility trigger. But it's also the reset the market likely needs to extend the cycle into year-end.

Stick to quality. Stay diversified. And remember – the market never takes the straight path to 7,000.

Please feel free to reach out to me on LinkedIn or by email if you would like help navigating this market environment or have any planning-related questions.

Dan Sheehan

[email protected]

This newsletter is for informational purposes only and should not be considered as investment advice. Please consult with your financial advisor about your specific situation.