5 Top Strategists on the Biggest Catalysts for Stocks This Fall

Key Takeaways

• Stocks rallied strongly over the course of the summer, with the Morningstar US Market Index climbing more than 10%.
• Interest rate cuts from the Federal Reserve, strong fundamentals, ongoing enthusiasm for AI, and a weakening dollar could boost stock returns at home and abroad.
• Threats to the Fed’s independence, stretched stock market valuations, and the ongoing impact of tariffs are potential fuel for renewed volatility.

It was a hot summer for stocks. As tariff worries faded, tech firms roared back to life and investors regained some optimism. The Morningstar US Market Index has climbed more than 10% over the past three months, leaving the jitters of this past spring in the dust. But the fall could bring new headwinds, as well as questions about whether this summer’s momentum can last.

Investors have so far shrugged off concerns about lofty valuations, while markets continue look beyond threats to the Federal Reserve’s independence. At the same time, inflation is remaining sticky and the labor market is showing signs of cooling.

On the other side of the coin, strategists say there are strong fundamentals and durable earnings results, especially from tech firms. Fed rate cuts could boost stocks. A weakening dollar could raise returns on international stocks.

Amid these crosswinds, Kristy Akullian, head of iShares investment strategy at BlackRock, says investors should be prepared for some volatility this fall. She’s constructive on the outlook for stocks this year, but cautions that “markets don’t march in a straight line.”

Here are five of the market’s top strategists on what they’re watching in the months ahead.

Are Fed Rate Cuts Priced Into the Stock Market?

Amid dramatic downward revisions to jobs growth and inflation that remains above target, all eyes are on the Fed this September. Markets widely expect a 0.25-percentage-point cut at the central bank’s next meeting.

“At this point, [the question is] not whether the Fed is going to cut, but how,” says Adam Hetts, global head of multi-asset at Janus Henderson Investors. He says a “victory” cut into a soft landing for the economy looks unlikely, given the slowdown in the labor market. It’s also probably too soon to characterize any cuts as recessionary, since economic data isn’t pointing toward disaster so far.

That leaves what Hetts calls “insurance cuts.” Interest rates are currently restrictive enough that the Fed has wiggle room to move closer to its neutral rate without necessarily beginning a full easing cycle.

Lisa Shalett, chief investment officer for Morgan Stanley’s Wealth Management division, doesn’t expect major stock moves around any rate cuts because markets are already pricing them in. “It’s a little bit of a ‘sell the news‘ event if it happens, as opposed to something I think is really going to be stimulative,” she says.

Market expectations that are already baked in carry some risk, especially in an environment where valuations are stretched and new economic data could change the picture. Markets are “pricing in a little bit of perfection,” Hetts says.

Mike Reynolds, vice president of investment strategy at Glenmede, will be paying close attention to the dot plot that will be released at the September meeting. “We could get incremental information on where exactly we’re heading on monetary policy, which is a really big market catalyst,” he says.

As long as economic growth holds up, an environment wherein rates are coming down “should be a good macro backdrop for risk-taking and for equities,” says BlackRock’s Akullian.

Trump, the Fed, and the Courts

One of the biggest stories of the summer has been President Donald Trump’s unprecedented challenge to the independence of the Fed. He’s publicly criticized Fed Chair Jerome Powell for not lowering interest rates and has attempted to fire Fed Governor Lisa Cook. But so far, markets appear to have shrugged off this threat.

Tracie McMillion, head of global asset allocation strategy at the Wells Fargo Investment Institute, says the relative quiet means markets are kicking the can down the road, likely expecting the matter to be resolved through the courts. “That’s probably going to take a while,” she says.

For Morgan Stanley’s Shalett, that legal case, along with a forthcoming court decision on the legality of Trump’s new tariffs, could be major turning points. “Those are really big,” she says. According to Shalett, the muted reaction to both issues shows that markets expect that tariffs could be thrown out as illegal and that Trump can’t reshape the Fed according to his wishes. The risks lie in the possibility that the courts come to a different conclusion than the market expects. “That’s the stuff keeping me up at night,” she says.

Stretched Valuations

Concerns about lofty stock valuations have made headlines all year. The worry on Wall Street is that high valuations set stocks up for declines if the market’s expectations for success aren’t met, potentially stoking volatility and amplifying the risk of a broader correction.

But so far this year, the highest-valued firms have delivered. “The largest, most valuable companies in the market continue to earn and keep pace with their valuations,” says Hetts of Janus Henderson.

Wells Fargo’s McMillion says it makes sense that these companies would carry higher premiums. “Companies that are growing really fast and/or have strong earnings [justify] a higher price/earnings ratio,” she says.

The big question is whether that trend will continue. “Can earnings continue to meet, beat, surprise, and delight?” asks Shalett of Morgan Stanley. There’s no guarantee. She points to the market’s tepid reaction to Nvidia’s most recent earnings report, which on paper was “spectacular.” When strong earnings fail to power the market higher, “it tells you that markets have to consolidate for a while … maybe the euphoria of the upside surprise is over.”

Another warning sign? Hetts of Janus Henderson says he’s seeing “more enthusiasm for lower-quality companies that haven’t yet delivered earnings” that match what their valuations imply. “That can either be a source of caution for investors or an early sign of a market broadening.” The health of the economy could tip the scales.

Tech Stock Momentum

The market’s reaction aside, analysts see Nvidia’s most recent round of earnings as a positive sign for the rally in tech stocks that has powered the market higher all summer.

“We would characterize it as still good enough for this AI trade to continue to drive the market,” says BlackRock’s Akullian. She’s seeing returns in tech stocks and large-cap growth stocks (particularly in the technology and communication services sectors) that are driven by earnings growth rather than unsustainable valuations. “We still feel comfortable with a lot of the year-to-date winners being able to continue winning,” she says. Investors concerned about portfolio diversification and concentration risk should look to international markets for balance, she adds.

McMillion of Wells Fargo says her team is pulling back on communication services exposure as valuations rise, but she continues to like the technology sector. Companies that are building technology infrastructure are “likely to benefit most in this phase of the AI buildout,” she says. In the markets overall, “we do see some risks. We’re positioning a little more cautiously.”

Morgan Stanley’s Shalett likes other ways to play the tech boom. She points to financials, which she expects to benefit not only from deregulation and a steeper yield curve but also from the adoption of digital assets and other new financial technologies. She also likes energy companies, which are likely to benefit from an urgent need to shore up electrical grid capacity amid surging demand for AI.

Stocks and the Health of the US Consumer

Outside of technology, strategists are paying close attention to the health of the consumer. Warnings about an impending spending slowdown thanks to tariffs and a slowing job market have captured markets’ attention this year.

But so far, the consumer is holding up, even as data shows a widening gap between consumers on the lower and higher ends of the income spectrum.

“There’s a lot of healthy caution there, but that caution hasn’t largely manifested in any kind of broader downturn,” says Hetts of Janus Henderson. Middle- and upper-income consumers are “continuing to show confidence and spend,” says McMillion of Wells Fargo, and they will likely continue to do so as long as the labor market holds up.

Tariffs will undoubtedly continue to weight on sentiment, but the impact could be gradual because of their uneven rollout. “It’s a process, not an event,” says Reynolds of Glenmede. McMillion says her team is underweight consumer sectors in the market right now, anticipating tariffs squeezing consumers for the next few months.

Further ahead, analysts are watching for new fiscal stimulus measures passed as part of Trump’s tax bill to help offset some of the pain of higher prices. “On the consumer side in particular, a lot of those benefits are going to hit in early 2026,” says Reynolds. Combine that with benefits for businesses, and “we would not be surprised if early in 2026, we see GDP accelerate above trend.”

What US Dollar Weakness Could Mean for the Outlook

Sustained weakness in the US dollar over the course of 2025 has boosted returns on international equity markets, some of which are outperforming their US counterparts. Strategists say investors can continue to benefit from that dynamic as the dollar continues to weaken. That means exposure to international currencies “can be a really nice tailwind,” says Reynolds, “especially in a year like this.”

Measured against a basket of international currencies, the dollar has fallen almost 10% this year. Hetts says investors shouldn’t expect the same scale of weakening in the months ahead, however. That means fundamentals are again at the forefront. “There’s optimism” there.

Reynolds says earnings outside the United States are “showing signs of life” after years of stagnation, while earnings are “much more compelling” compared with the US stock market. BlackRock’s Akullian points to structural tailwinds abroad (shareholder-friendly reforms in Japan, or stimulus spending in Europe) that will continue to boost returns for investors.