The Market After Jackson Hole: Why the Next Three Weeks Could Get Volatile
Our 1–3 Week U.S. Stock Market Outlook
The U.S. equity market enters September in an unusual position.
On the surface, the picture remains bullish. Corporate earnings are strong. Artificial intelligence spending continues to drive extraordinary growth across semiconductors, software and data-center infrastructure. The S&P 500 remains near record territory, while the Nasdaq has continued to outperform.
But underneath the surface, the market's risk equation has changed.
The message coming out of Jackson Hole was not what equity investors wanted to hear.
Federal Reserve Chairman Kevin Warsh made it clear that inflation remains a serious problem and that the Federal Reserve is willing to keep monetary policy restrictive—even if that means creating short-term economic pain. Markets responded immediately: Treasury yields jumped, the probability of a September rate increase increased substantially, the dollar strengthened and equities sold off. The S&P 500 declined 0.2% Friday and the Nasdaq fell 0.5%.
That does not mean the bull market is over.
It does mean the next several weeks are likely to be considerably more complicated.
Our Base Case: A Volatile Consolidation, Not a Bear Market
Our base-case expectation for the next one to three weeks is:
S&P 500: roughly 7,550–7,900
Nasdaq Composite: roughly 25,500–27,000
We expect the market to experience a period of higher volatility, profit-taking and sector rotation, followed by an attempt to resume the broader bullish trend.
In other words:
We expect a correction before we expect a bear market.
The distinction is important.
The S&P 500 finished Friday at approximately 7,712, while the Nasdaq finished around 26,402. For the week, the S&P 500 gained about 0.5% and the Nasdaq gained roughly 0.8%.
Those numbers look perfectly healthy.
The internals are more complicated.
The Bond Market Has Become the Most Important Market
For the next several weeks, investors should arguably pay more attention to the Treasury market than to the stock market.
Why?
Because equities have been operating under the assumption that monetary policy would eventually become more accommodative.
Jackson Hole challenged that assumption.
The two-year Treasury yield jumped approximately 12 basis points Friday to 4.35%, its largest one-day increase since March. Interest-rate futures moved to roughly a 58% probability of a September rate increase, compared with approximately 35% the previous day.
That is a significant repricing.
At the same time, Treasury Secretary Scott Bessent has been attempting to influence long-term Treasury yields through increased Treasury buybacks. The Treasury announced that longer-dated bond buybacks would be doubled to at least $4 billion per operation, while Bessent indicated that individual operations could potentially become larger.
Here is where things become particularly interesting.
The Treasury wants lower long-term borrowing costs.
The Federal Reserve wants financial conditions sufficiently tight to defeat inflation.
Those objectives are not necessarily aligned.
Warsh's Jackson Hole message effectively reminded the market that the Fed—not the Treasury—controls monetary policy.
That distinction matters enormously.
If the Treasury succeeds in pushing long-term yields lower while the Fed maintains or raises short-term rates, the yield curve could become increasingly distorted.
If the bond market begins demanding a larger risk premium because of fiscal policy, inflation and Treasury intervention, however, the opposite could occur: long-term yields rise despite Treasury efforts to push them lower.
That would be significantly more dangerous for equities.
Why We Are Not Calling for a Major Bear Market
Despite these concerns, we do not currently see the ingredients for a sustained equity bear market.
The fundamental earnings picture remains exceptionally strong.
Second-quarter S&P 500 earnings growth is estimated at approximately 34.5% year-over-year, while roughly 85% of companies reporting have exceeded earnings expectations.
That is difficult to reconcile with a major recessionary bear-market thesis.
More importantly, the AI investment cycle remains intact.
Nvidia recently delivered another extremely strong earnings report and projected approximately 70% revenue growth for the next fiscal year.
And the technology leadership is becoming broader.
The recent Nasdaq 100 data shows particularly strong performance in software and communications-related technology. CrowdStrike, Synopsys, Atlassian, Fortinet, Cadence Design Systems, AppLovin, Palantir and Palo Alto Networks were among the major weekly winners.
That is an important distinction.
This is no longer simply:
Nvidia + Microsoft + a handful of mega-cap stocks.
There is significant participation throughout the technology ecosystem.
But There Is a Warning Signal Developing
The problem is that the broader market is not participating equally.
The S&P 500 has continued making progress even while a meaningful number of individual stocks struggle.
MarketWatch recently highlighted this divergence: the index has been increasingly supported by a relatively small group of mega-cap technology and AI companies, even as broader stock performance has been less impressive. Approximately 69% of S&P 500 companies remain above their 200-day moving averages, so this is not a broken market—but it is becoming increasingly dependent on its largest winners.
That creates a vulnerability.
If Nvidia, Microsoft, Broadcom, Meta, Amazon and the major software leaders continue advancing, the indexes can remain remarkably resilient.
But if those stocks begin falling simultaneously, the S&P 500 and Nasdaq could decline much faster than the headline index suggests.
This is why we believe market breadth is going to be more important than the index itself over the next several weeks.
The Sector Rotation Is Sending a Mixed Message
The recent market action is fascinating.
Technology and software remain strong.
But several economically sensitive areas have become less convincing.
The latest Nasdaq 100 data showed communication equipment, computer peripherals, telecommunications and software among the strongest areas, while semiconductors were essentially flat for the week.
That last point deserves attention.
AI is strong.
Software is strong.
But not every semiconductor is participating.
Applied Materials and Marvell were among the significant weekly decliners, while Nvidia remained much stronger.
This tells us that investors are becoming selective.
They are willing to pay for demonstrable earnings growth, but they are becoming less willing to buy the entire technology complex indiscriminately.
That is typical of a mature bull-market environment.
The Next Major Catalyst: Employment
The next major market-moving event may not be Jackson Hole.
It will be the August employment report.
And this could produce a fascinating paradox.
A strong jobs report could be bearish for stocks.
If employment and wages come in stronger than expected, investors may conclude that the economy is strong enough for the Fed to raise rates.
That would push Treasury yields higher and potentially pressure high-valuation technology stocks.
A weak jobs report could initially be bullish.
A softer labor market could reduce expectations for a September rate hike and bring Treasury yields lower.
That could immediately benefit technology, software and other duration-sensitive assets.
But there is a limit.
If the jobs report is too weak, investors may stop interpreting it as "good news for the Fed" and start interpreting it as evidence of an economic slowdown.
Therefore, the sweet spot for equities is probably:
Moderate employment growth + cooling inflation + stable consumer spending.
That combination would allow the Fed to remain patient without signaling that the economy is deteriorating.
Our S&P 500 Outlook
We expect the S&P 500 to remain relatively resilient.
The index is sitting close to record levels and earnings are providing a substantial fundamental cushion.
Our base case is that the S&P 500 experiences a 3–5% pullback or consolidation from recent highs, rather than a major breakdown.
That would put an approximate near-term downside zone around:
7,400–7,500
We would view that area as potentially attractive if Treasury yields stabilize and technology leadership remains intact.
Our bullish scenario would take the S&P 500 toward:
7,900–8,000
over the next several weeks if employment data is benign, Treasury yields decline and the market receives another positive catalyst from earnings.
Our bearish scenario would be:
7,200–7,400
That scenario becomes increasingly likely if the 10-year and 30-year Treasury yields rise sharply, September rate-hike expectations move materially higher and technology leadership begins breaking down.
Our Nasdaq Outlook
The Nasdaq is more complicated.
It has greater earnings-growth exposure, but it is also substantially more sensitive to interest rates and valuation multiples.
That makes the Nasdaq the higher-beta trade.
We expect a larger range of outcomes.
Base case:
25,500–27,000
Bull case:
27,000–28,000
Bear case:
24,500–25,500
The Nasdaq could easily outperform the S&P 500 if Treasury yields fall.
Conversely, it could underperform sharply if the bond market sells off again.
This is why the Nasdaq is currently more dependent on the Treasury market than on the economy itself.
The Three Scenarios We Are Watching
🟢 Scenario 1 — Bullish Continuation
Probability: ~35%
Inflation data continues to moderate.
Employment remains healthy but not excessively strong.
Treasury yields stabilize or decline.
September rate-hike expectations fall.
AI earnings remain strong.
Under this scenario:
S&P 500 → 7,900–8,000
Nasdaq → 27,000–28,000
Technology resumes leadership and the market pushes toward new highs.
🟡 Scenario 2 — Volatile Consolidation
Probability: ~50%
This is our base case.
Economic data remains mixed.
Inflation remains sticky.
The Fed maintains a hawkish posture.
Treasury yields remain elevated.
Investors rotate between technology, financials, industrials and defensive sectors.
The indexes move sideways with several sharp daily moves.
Under this scenario:
S&P 500 → 7,550–7,900
Nasdaq → 25,500–27,000
This would represent a healthy digestion period rather than a structural bear market.
🔴 Scenario 3 — Bond-Market Shock
Probability: ~15%
This is the scenario we would take most seriously.
Long-term Treasury yields rise sharply.
The market begins questioning fiscal sustainability.
The Fed remains hawkish.
September rate-hike expectations rise substantially.
Technology valuations begin contracting.
The AI leadership group experiences simultaneous selling.
Under that scenario:
S&P 500 → 7,200–7,400
Nasdaq → 24,500–25,500
A move of that magnitude would not necessarily mean the bull market was finished.
It could simply represent a valuation reset.
But it would change the market's character considerably.
What We Would Watch Most Closely
Forget the noise.
For the next three weeks, there are five things that matter.
1. The 2-Year Treasury Yield
This is our leading indicator for Fed expectations.
A move back toward the low-4% range would be supportive of growth stocks.
A sustained move above 4.5% would increase pressure on technology valuations.
2. The 10-Year and 30-Year Treasury Yields
This is the bigger structural issue.
If Bessent's Treasury operations succeed in stabilizing long-term yields, equities could breathe easier.
If the bond market refuses to cooperate, the equity market will eventually have to adjust.
3. Nvidia and Broadcom
These are increasingly important market barometers.
The question is not simply whether they rise.
The question is whether institutional investors continue buying the semiconductor ecosystem after the initial Nvidia earnings enthusiasm.
Broadcom's upcoming earnings will therefore be particularly important.
4. Market Breadth
We want to see more stocks participating.
If the S&P 500 rises while fewer stocks participate, that is a warning.
If technology remains strong and participation expands into financials, industrials, materials and consumer discretionary, that would be considerably healthier.
5. The Dollar
A stronger dollar combined with rising Treasury yields can create a particularly difficult environment for risk assets.
Conversely, a stable or weaker dollar combined with falling yields would provide a powerful tailwind for equities.
The Bottom Line
The stock market is not bearish.
But it is no longer the easy, one-directional market that existed before Jackson Hole.
The fundamental story remains remarkably strong.
Corporate earnings are strong.
AI investment remains enormous.
Technology and software leadership remains intact.
The economy does not currently appear to be entering a recession.
But the bond market has become the battlefield.
The new Federal Reserve chairman has made inflation his priority, while Treasury Secretary Scott Bessent is attempting to influence borrowing costs and the long end of the Treasury curve. Meanwhile, markets are reassessing the probability of a September rate increase.
That creates an unusually important tension between monetary policy, fiscal policy and the Treasury market.
Our conclusion is therefore straightforward:
We expect the U.S. stock market to remain bullish over the intermediate term, but we expect the next one to three weeks to be volatile and potentially corrective.
The most likely outcome is not a crash.
It is a market that moves sideways, tests support, rotates between sectors and waits for economic data to determine whether the Fed actually has to raise rates.
Our current positioning:
S&P 500: Moderately Bullish
Nasdaq: Bullish, but higher risk
Technology: Overweight
AI/Semiconductors: Overweight, but selective
Software: Overweight
Financials: Neutral to moderately bullish
Industrials: Neutral
Energy: Selective
Long-duration assets: Cautious
Cash/T-bills: Attractive for tactical liquidity
Overall market regime:
BULLISH — BUT ENTERING A HIGHER-VOLATILITY PHASE
The most important thing investors should understand is that a 3–5% correction would not invalidate the bull market.
In fact, given how far the major indexes have traveled and how aggressively investors have crowded into AI and technology, a controlled correction could ultimately make the market healthier.
The real warning signal would not be the S&P 500 falling 2–3%.
It would be:
Treasury yields rising + technology leadership breaking + market breadth deteriorating + earnings expectations falling.
If those four things occur simultaneously, the investment thesis changes.
For now, they have not.
And that is why we remain constructive on U.S. equities—but considerably more cautious about chasing the market at current levels than we were before Jackson Hole.
Market outlook is for informational purposes and represents a scenario-based assessment, not individualized investment advice. Not Financial Advice