Market Moves After Summer: What’s Next?

As we head into the fall, it’s the perfect time to reassess the investment landscape and stay on top of key trends. Here are 7 insights from J.P. Morgan on where things stand as of the end of August, and what they might mean for our economy moving forward.

1. Impressive Year-to-Date Returns

Diversified portfolios have posted another strong year following big gains in 2023 and 2024. As of August 29^th, the S&P 500 (stocks) were up 10.8% and the Bloomberg U.S. Aggregate Bond Index was up 5.0%. Together, an average 60/40 portfolio (60% stocks, 40% bonds) might have gained 8.5% in 2025.

2. Valuation Concerns on the Rise

Though the market has been performing well, stock prices now look expensive compared to earnings. The S&P 500 is trading near tech bubble levels, with a forward P/E ratio of 22.4 (1.6 standard deviations above its 30-year average). The total value of U.S. companies has also climbed to a record of 363% of GDP. The top 10 stocks now account for almost 40% of the index and trade, creating a concentration risk.

3. International Markets Surging Ahead

In the U.S., big and fast-growing companies are doing better than smaller ones, although not by huge margins. By contrast, both DM and EM international equities have strongly outperformed U.S. markets thanks in part to a weaker dollar. The MSCI All World Ex-U.S. Index generated a total return of 13.8% in local currency and 22.2% when converted to U.S. dollars.

4. Political and Economic Risks to Watch

Investors should consider the economy’s trajectory alongside the influence of current Washington policies. Although markets have been performing well, the administration’s policies such as uncertain tariffs, decreased immigration trends, and fiscal policy dynamics in the OBBBA tax bill continue to influence inflation, wages, and economic growth.

5. Labor Force Growth Remains Slow

AI spending and declining immigration trends could cut U.S. working-age population growth by ~300,000 annually. Job creation has averaged just 36,000 per month recently, with unemployment steady at 4.2%. August may add 100,000 jobs, though revisions could lower the average. Overall, we don’t expect the unemployment rate to rise much in the months ahead and expect job growth to be very slow.

6. Rising Inflation

Inflation has crept back up, with Consumer Price Index (CPI) expected to hit ~3% year-over-year in August and potentially 3.5–4% into early 2026. Prices are rising moderately, tariffs are keeping inflation elevated, and we can expect it to peak in early 2026 before easing later in the year.

7. Potential Fed Rate Cuts on the Horizon

The Fed is in a tricky spot. Despite above-target inflation, the Fed may begin cutting rates by 25 basis points in September, with at least one more cut later in the year, partly due to both economic and political reasons. Rates could fall toward 3% by mid-2026, potentially weakening the dollar and affecting global markets.

Staying informed and on top of key changes is crucial to navigating the evolving financial landscape. Start by reviewing your investment strategy with a trusted financial advisor.