Momentum Train on Wall Street Hits Full Speed Into September

Even with Friday’s market dip, Wall Street’s risk-on momentum is charging into September with remarkable strength and few investors seem inclined to hit the brakes.

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Throughout the week, markets largely brushed off potential headwinds, from renewed political pressure on the Federal Reserve to softer revenue guidance from Nvidia Corp. The calm held until a tech-driven pullback late Friday, triggered during light trading volumes. Still, that stumble barely dented what has been a robust summer run, with the S&P 500 logging its fourth consecutive monthly gain.

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Investor appetite for risk is spilling across asset classes from corporate credit and digital assets to cyclical currencies. The reasoning feels straightforward: the Fed appears ready to cut rates, U.S. consumers remain resilient despite skepticism, and the artificial intelligence narrative continues to fuel optimism.

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Even a backdrop of growing risks hasn’t derailed the bullish tone. Trade tensions, a softening labor market, and mixed signals from bonds have yet to shake confidence. If anything, these factors have reinforced expectations for policy easing and extended the belief that the economic expansion still has room to run.

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One way to gauge this optimism is through Societe Generale’s cross-asset momentum index, which tracks 11 components including copper versus gold, cyclical versus defensive equities, crypto, and high-yield bonds. This measure has tested its most bullish readings five times since April’s tariff-driven turbulence, including another spike this month.

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“Investors now see that tariff impacts are far less damaging than initially feared, and that’s restoring confidence especially with fundamentals still looking solid,” said Omar Aguilar, CEO of Charles Schwab Investment Management Inc.

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Volatility, or rather the lack of it, is another striking feature. Short-term implied volatility across major assets has dropped below long-term averages, hitting levels rarely seen over the past four years, according to Cboe Global Markets. This extended calm contrasts sharply with the turmoil following last month’s surprise jobs report. Coupled with last quarter’s upward GDP revision to 3.3%, investors have yet another reason to stick with risk assets.

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For Mandy Xu, head of derivatives market intelligence at Cboe, this stability has roots in a clear economic narrative:
“Despite tariff-related noise, consumers remain strong, inflation is contained, and the Fed is preparing to ease,” Xu said. “Until that story changes, volatility is likely to stay muted for now.”

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Still, prolonged tranquility can breed overconfidence, as Friday’s minor setback reminded traders. Even so, the S&P 500 finished the week just 0.1% lower. Junk bonds extended their winning streak to a fourth week, while 10-year Treasury yields continued to climb.

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“When every asset class sees volatility collapse at the same time, that’s a warning sign of complacency,” said Peter van Dooijeweert, head of strategic investment partnerships at Capstone Investment Advisors. “The Fed faces heavy political pressure, and tariff effects over the next year remain uncertain. Markets seem too relaxed considering the risks ahead.”

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Yet, that caution hasn’t translated into widespread retreat. Many investors view the current stance not as blind optimism, but as a pragmatic response to a market that has consistently defied bearish calls all year. Stepping aside now feels harder than staying the course.

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Data from Barclays Research underscores this point: institutional players ramped up equity purchases in August. Hedge funds, commodity trading advisors, and risk-control strategies all boosted allocations as volatility collapsed a rare “re-risking” event that pushed positioning above historical averages.

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“The only thing that could really jolt this market is a sharp move higher in interest rates or a meaningful slowdown in tech growth,” said Max Wasserman, co-founder and senior portfolio manager at Miramar Capital. “Frankly, I’m cautious because this market is heavily concentrated in a few big names.”

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Wasserman, a dividend-growth investor, holds positions in Microsoft Corp., Broadcom Inc., and Alphabet Inc., which collectively account for roughly 15% of his portfolio. While many of his other holdings have been “lagging,” he’s hedging exposure with energy which he expects to benefit from a weaker dollar and healthcare stocks.

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