Wall Street banking titan JPMorgan is cautioning investors that the Federal Reserve’s anticipated interest rate cut on September 17 could trigger a “sell the news” reaction in U.S. equities, despite a rebound in markets since April. 

According to the bank’s trading desk, led by Andrew Tyler, the rally faces mounting headwinds such as inflation pressures, softening labor data, ongoing trade frictions, and seasonal weakness in September. 

“This current bull market feels unstoppable with new support forming as former tent poles weaken. If the Fed follows through on a widely expected interest-rate cut at its Sept. 17 meeting, that “could turn into a ‘Sell the News’ event as investors pull back,” Tyler said. 

The bank highlighted that retail investor participation typically falls this month, while corporate buybacks also tend to ease, reducing a key source of demand for stocks.

Tyler noted that the Fed’s move, while almost certain, may spark profit-taking as investors reassess risks. 

JPM hedging recommendations

While the trading desk maintained a tactical bullish stance, its conviction remains notably lower. To this end, JPMorgan advised hedging through VIX call options and gold exposure, even as history suggests that rate cuts outside recessions can still support equities.

Separately, JPMorgan strategist Fabio Bassi said the Fed’s likely policy shift would be limited to a quarter-point reduction. 

He emphasized that a larger 50-basis-point cut remains unlikely, describing the move as an “insurance cut” to cushion slowing payroll growth while inflation remains above target. 

Bassi argued that the latest labor data rules out holding rates steady but does not justify a deeper cut.

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