Themarket outlookfor September 2024 remains cautiously optimistic. While there are expectations of continued growth, it is important to remain aware of potential risks, such aselevated valuationsandconcentrated gains in a few sectors. Below, we highlight the key factors that will influence the stock market in the coming month. Additionally, we share our insights on promisinginvestment picksfor September to help investors generate higher returns.

Essential Indicators to Monitor

The stock market’s performance in September 2024 is expected to be influenced by several key factors:

Federal Reserve’s Interest Rate Decisions:

Investors are anticipating potential interest rate cuts by the Federal Reserve in September, which could boost market sentiment. The Federal Reserve’s next interest rate decision is scheduled for September 17-18. Market expectations indicate that the Federal Reserve is likely to cut interest rates during this meeting. Federal Reserve Chair Jerome Powell has given strong indications that a rate cut is imminent, with most analysts predicting a reduction by 25 basis points (0.25%). These expectations are widely anticipated by the market and may result in a potential “buy-rumours – sell – the news” stock market reaction, in our view. However, a more aggressive interest rate cut, let’s say, by 0.50% could trigger continuing bull trend on the stock market, in particular, the bull signal could be triggered for small- and mid-cap stocks.

As of now, the probability that the Federal Reserve will cut interest rates by 0.50% (50 basis points) at the September 2024 meeting is approximately 36.5%. This suggests that while there is notable anticipation for a larger cut, it remains less likely compared to the more common expectation of a 0.25% (25 basis points) cut.

Economic Growth and Inflation:

While inflation has been moderating, the economic growth outlook remains mixed. Analysts expect a cooling in economic growth, but not a significant slowdown. Let’s say, we expect a “soft landing” scenario.

Based on multiple forecasts, U.S. inflation is expected to continue its decline in 2024. Estimates suggest an average inflation rate of around 2.4% for the year, with some forecasts projecting it to be as low as 1.9% to 2.0%.

The probability of inflation increasing in September 2024 appears to be low. The Federal Reserve is anticipated to cut interest rates in response to the slowing inflation. Additionally, economic forecasts suggest that inflation will remain under control, with core inflation sticking around 3% in 2024. In our view, a month-over-month decline in inflation in September 2024 is expected to result in a positive reaction from the stock market, driven by anticipated Fed rate cuts and improved economic outlook.

Lower inflation tends to boost investor confidence as it alleviates concerns about the rising cost of goods and services, which can improve corporate profit margins and consumer spending power. if this scenario happens, we should expect positive momentum in small- and mid cap stocks.

Sector Performance:

Small-capandvalue stockshave been performing well recently, and this trend might continue if the Fed eases monetary policy. So far, among the top performing sectors we saw Technology, Communication Services and Utilities. Large-cap stocks led the market performance due to solid earnings’ reports. Strong earnings, particularly from companies involved inartificial intelligence, have been a driving force behind market gains. However afterNvidia’ssecond quarter 2025 financial results, the tech-stocks’s performance may cool down. In our view, many investors will want to take profits in the tech sector after spectacular run since the beginning of the year.

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For September 2024, several industries and sectors are anticipated to outperform the broader stock market based on recent analyses:

• Utilities: This sector is considered to be priced at a discount compared to the broad market, making it poised for potential re-rating and strong performance. The expectation that the U.S. Federal Reserve will decrease interest rates in the near future could benefit utility stocks, as lower rates generally enhance the attractiveness of dividend-paying stocks. In our opinion, the stock market is likely to experience significant volatility in September. During such periods, defensive sectors, such as utilities, tend to perform better compared to more volatile industries like semiconductors.
• Technology: Companies in this sector, especially those involved ine-commerce, cloud computing,anddigital services, offer convenience through innovative solutions and services. We highlightSynchronoss Technologies (SNCR)andImmersion (IMMR).
• Healthcare: Thehealthcare sectoris predicted to lead with a market-leading earnings growth of 17.8% in 2024, making it a strong contender for outperforming the broad market. There is significant optimism around the integration of AI and GenAI in healthcare. Large companies are expected to form new partnerships to leverage these technologies, which could lead to innovative treatments and improved patient outcomes. Enhancements in digital capabilities aimed at achieving population health goals will likely enhance the quality of care and value provided to patients. Among the best performing companies from this sector we highlightPfizer (PFE),Elevance Health (ELV).

• Consumer Staples:This sector includes companies that produce essential products such as food, beverages, and household items. These products are always in demand, providing convenience to consumers. Companies that are leaders in this sector are well-positioned to attract investor interest if the monetary relaxation policy begins in September.
  

We expect that the above mentioned sectors will benefit from various macroeconomic factors, including anticipated interest rate cuts by the Federal Reserve, which could stimulate growth and investor confidence.

While we maintain a cautiously optimistic outlook on stock market performance for September, it is important to acknowledge potential risks that could heighten market volatility. Chief among our concerns is the impact of the economic slowdown coupled with ongoing geopolitical tensions.

Investment Picks for September