Here’s where the stock market is headed next after a tough August, according to Wall Street’s top strategists

Wall Street firms are split on whether the August stock slump will continue.Lucas Jackson/Reuters

  • The S&P 500 soared 21% in the first seven months of 2023 but the rally hit a roadblock in August.

  • Historical trends are particularly weak in August and September, and macro headwinds remain.

  • Here’s what Wall Street thinks about where the market is headed as investors try to shake off the August slump.

The stock market started 2023 with a sprint, with the S&P 500 gaining 21% through July and seemingly on pace for a record highs — but the month of August hit equities like a ton of bricks, eating into about a quarter of those those gains by mid month.

Historical trends tell us August is not typically pleasant for stocks, and unfortunately the same is true of September. These months are particularly bad for traders in the year before a presidential election, too.

The way things stand, there’s a lot more than history weighing on the stock market. The Federal Reserve remains hawkish even after 11 interest rate hikes, and investors have extended their outlook for potential rate cuts well into next year. Pushing out the expectation for lower rates sent bond yields soaring, with the 10-year Treasury hitting its highest mark since 2007 earlier this month.

Equity-risk premium, which measures the return investors can expect for holding stocks over bonds, has dropped to its lowest level since 2009 and some commentators have pointed to that as a warning signal for stocks.

Overseas, too, China’s economic troubles continue to mount and it’s spooking markets around the world, all while Russia continues its war against Ukraine.

Here’s what some of Wall Street’s top commentators expect to happen next.


The bank’s chief global stock strategist, Dubravko Lakos, said in a CNBC interview after Jerome Powell’s Jackson Hole speech that the 2023 market rally is over, and investors are overly bullish in their current positioning.

In his view, the market won’t see central bank easing anytime soon and the Fed’s hawkishness will ultimately cap near-term stock gains. He also said that the continued strength of the economy has merely pushed out the timing of a recession and a “hard landing” scenario is inevitable.

“I just have a hard time believing that inflation is gonna come down, the Fed is going to be cutting rates, and growth will be just fine,” Lakos said.

Morgan Stanley

The bank’s CIO, Mike Wilson, pointed to the failed rally after Nvidia’s blowout earnings as reason to taper the outlook ahead for stocks. Like Lakos, he’s not bullish on the remainder of the year.

“Remember, markets top on good news, and they bottom on bad news,” Wilson said in an interview with Bloomberg on August 25. “I can’t think of any better news then what we got from [Nvidia] on Wednesday…and we had a failed rally. That’s another negative technical signal that the rally is exhausted. We’re going to need a story to get people excited, and I don’t know what that story is.”

The rally that started in March with a small batch of tech names, like Nvidia and Tesla, broadened out too much without reason, he explained. That narrative seems unsustainable, and the Fed’s policy decisions could drag on another rally.

By contrast to Wilson’s bearish take, however, Morgan Stanley senior portfolio manager Andrew Slimmon said he sees the S&P 500 nearing 5,000 by year-end — what would be an 11% jump.

“As we get closer to the end of the year, the pain of being underweight equities, and the resultant lack of performance is going to intensify forcing positive fund flows,” Slimmon said on CNBC Tuesday.


Tom Lee of Fundstrat, who has dished out a series of accurate bullish forecasts all year, said Tuesday that the S&P 500 is about to shrug off its August doldrums.

He expects a month-long rally to bring the index back to its 2023 highs, even though many of his peers expect a soft September. In a note to clients, Lee pointed to a cooling economy, a no-hike move from the Fed, and overly bearish investors as reasons to expect a stronger month ahead.

“We believe this past week is more evidence of the anchoring bias of ‘hawks,'” Lee said.


A “tidal wave of AI-driven spending” is about to fuel another rally in tech stocks, according to Wedbush’s Dan Ives.

“Our thoughts: despite a stubborn 10-year and the Fed, tech goes higher,” he told clients in a note, pointing to Nvidia’s upbeat guidance as reason to stay bullish on tech.

“It’s the rocket ship-like trajectory of AI-driven growth that will hit the shores of the tech industry over the next 12-18 months that speaks to our unabated bullishness for tech stocks,” Ives added.

Jeremy Siegel

The stock market has plenty of upside still, even if September and October are choppy trading months. In his view, the S&P 500 could see another 9% gain from current levels as long as Jerome Powell acknowledges that inflation is indeed falling, and if the Fed holds off on further rate hikes.

“I think for the rest of the year, we’re stable to upward,” Siegel told CNBC near the end of August. “And if [Powell] doesn’t raise [interest rates] anymore and says inflation [is] falling, it could be 20% to 25% for the full year.”

David Rosenberg

The Rosenberg Research president wrote in a note that stocks are going to tumble under the weight of broader economic pressures, including slumping bond prices and soaring yields.

“Round two of the drawdown in the equity market is set to follow,” he said. “Cash is king.”

Rosenberg said a stubborn labor market could keep the unemployment rate from rising enough for the Fed to feel comfortable, and it could lead policymakers to push ahead with more rate hikes to cool the economy — further tightening the screws on markets.

Specifically, he noted that the two S&P 500 sectors that have powered the index this year, discretionary and IT, are on track for their worst month of the year.

Key Advisors Wealth Management

Stocks could tank by 10% or more in the event of another rate hike, the firm’s CEO told Yahoo Finance in an interview Tuesday. That would erase a large portion of the S&P 500’s 17% gain this year.

“You normally will see a double-digit drop…when the market finally prices in the recession,” Eddie Ghabour said.

Enormous credit-card debt and the resumption of student loan payments from October may drag on the American consumer, which will hurt the economic outlook but potentially get the Fed closer to its goals of finally bringing inflation back to 2%, he explained.

“The only way you can get there is by demand destruction,” he said. “I don’t see how you can get that rate of change to drop that much by next year without a recession.”

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