US Stock Market Hit by Double Whammy: Rising Treasury Yields and September Weakness

▲ U.S. Federal Reserve (Fed), Bond Market / AI Generated Image

As the U.S. 10-year Treasury yield soared to 4.79%, warnings have emerged that the stock market in September could bear the brunt of seasonal weakness combined with a shock to the bond market.

According to Barron's on September 1 (local time), the S&P 500 finished its best August in five years. However, the average return for September since 1928 has been recorded at -1.1%. The U.S. 10-year Treasury yield hit its highest level during Donald Trump's second term on Monday. On Tuesday morning, it rose an additional 4 basis points, reaching 4.79%.

Immediate fiscal responses to quickly calm bond yields are also difficult to expect. U.S. Treasury Secretary Scott Bessent stated at the G20 meeting on Monday that it could take weeks or months to prepare a fiscal consolidation package. This was a burden for the market, which had expected immediate measures to reduce the fiscal deficit.

Escalating armed conflicts in the Middle East are also fueling inflation concerns. According to a Bloomberg report citing risk management firm Marisks, two very large crude carriers were attacked in the Strait of Hormuz. There is growing vigilance that if rising energy prices increase inflationary pressure, the upward trend in Treasury yields could become even stronger.

Market attention is now focused on the U.S. Consumer Price Index (CPI) on September 11 and the Federal Reserve (Fed) meeting five days later. Fed Chairman Kevin Warsh stated that he is prepared to act to curb inflation. Barron's warned of the possibility of another significant correction in the September stock market if inflation is higher than expected or if the Fed does not raise interest rates.

[Article Key Summary]

-The U.S. 10-year Treasury yield rising to 4.79% has emerged as a key risk factor for the September stock market.

-The S&P 500's average September return since 1928 is -1.1%, combining seasonal weakness with the burden of rising bond yields.

-The U.S. Consumer Price Index on September 11 and the Fed meeting on September 16 have been identified as key dates that will determine the trend of Treasury yields and the stock market.

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