As the holiday season fades into the rearview mirror, markets are bracing for a high-stakes stretch. September brings a rare convergence of risks: the US Federal Reserve and the Bank of Japan will hold policy meetings within the same week, an Anthropic IPO could serve as a pressure test for the AI trade, France's budget battle and the UK's fiscal trajectory are heating up, and the energy price shock from the Iran war continues to erode the global growth buffer. The pile-up of these factors makes the trigger point for the next wave of market turbulence hard to pin down.
The Fed's September 16 meeting is the most-watched event on the near-term calendar. Markets are pricing in roughly a 40% probability of a rate hike, and Chair Warsh's language will be just as critical as the decision itself—though his famously terse communication style has already left investors guessing. Meanwhile, the Bank of Japan is expected to announce a rate increase on September 18, with the 10-year JGB yield already hovering near 3%, the highest level since the mid-1990s. The policy signals from both central banks landing in the same week create a potential double whammy.
On the tech front, Anthropic is shaping up to be the next mega-cap listing after SpaceX, with reports pointing to a fundraising target as high as $100 billion. Analysts warn that if investor enthusiasm for the AI theme falters—even briefly—stocks like Nvidia and Microsoft, which are already priced for massive AI infrastructure demand, would feel the pain first. The market currently lacks sufficient diversification to cushion such a shock.
Fed and BOJ: Same-Week Decisions, Double-Edged Volatility
The Fed and the Bank of Japan will hold their meetings in the same week, a rare timing overlap that has put markets on high alert.
On the Fed side, the market's pricing for a rate hike at the September 16 meeting stands at about 40%. Justin Onuekwusi, Chief Investment Officer at St. James's Place, notes, "How the Fed communicates going forward is crucial, because it directly affects its overall credibility and the trajectory of global interest rates."
Adding to the complexity, recent Treasury market interventions by the US Department of the Treasury could dilute market signals, making the Fed's path even harder to read. Warsh is scheduled to speak at the Jackson Hole symposium today (August 28), and the tension between his belief in a market-oriented Fed and his characteristically brief communication style remains a key source of uncertainty.
On the BOJ side, markets broadly expect a rate hike on September 18. Japan has already intervened in the foreign exchange market to support the yen, and the 10-year government bond yield is nearing 3%, the highest since the mid-1990s.
Hank Calenti, Global Markets Chief Strategist at SMBC EMEA, says, "The key is the narrative and how hawkish the governor's language is," pointing out that subtle shifts in wording could reshape the yield curve for Japanese government bonds.
In addition, the European Central Bank is widely expected to raise its deposit rate by 25 basis points to 2.50% at its September 10 meeting, though policymakers show no intention of signaling further tightening beyond that. With recent inflation upticks in several eurozone countries and energy prices spiking on geopolitical tensions, market pricing puts the probability of a September hike at 95%.
Anthropic IPO: The Stress Test for AI Optimism
Following SpaceX's mega-IPO in June, Anthropic is poised to be the next ultra-large tech company to go public, with reports suggesting a fundraising goal of up to $100 billion. Having been valued at $965 billion in May, an IPO valuation surpassing $1 trillion would place it among the world's largest listed companies.
However, this prospect carries latent risks for the AI trade. Large tech firms have been issuing debt heavily to fund capital expenditures, and the market's capacity to absorb that supply is already under strain. Rory Dowie, Multi-Asset Portfolio Manager at Marlborough, remarks, "In the case of Anthropic and OpenAI, valuations could be extremely bubbly," hinting that both companies' IPO prospects face high-valuation risks.
Violeta Todorova, Senior Research Analyst at Leverage Shares, issues a blunter warning: "If investor enthusiasm for this theme wavers, even for a short time, there is no diversification buffer in the market." She notes the impact would ripple directly into Nvidia, Microsoft, and every stock priced for AI infrastructure demand—not just the newly listed names.
France and Germany: European Debt Pressures Resurface
The French government will submit its budget draft to the National Assembly in the coming weeks, setting the stage for a political showdown. The government must balance deficit control against the approaching 2027 presidential election, where polling suggests the far right could gain ground.
Guy Miller, Chief Economist at Zurich Insurance Group, says: "There is upside risk to French OAT yields, but we don't think it will be severe enough to destabilize the broader architecture of eurozone debt."
Germany faces its own pressures. Chancellor Merz is heading into a series of state elections, with his approval ratings sagging amid a string of political missteps, and the far-right AfD could outpace his party in some contests. The German bond market is consequently facing potential headwinds as well.
UK: New Government's Fiscal Path Under Scrutiny
New British Prime Minister Andy Burnham's policies have yet to trigger significant market concern, but his push for economic growth within tight fiscal constraints could change that. September's Labour Party conference and October's budget will be critical tests for Burnham and new Chancellor John Healey.
UK 10-year borrowing costs remain elevated, though they have eased slightly from the 18-year peak hit in May. The shadow of the 2022 'mini-budget' crisis may constrain the new government's policy room, with Burnham pledging to adhere to UK fiscal rules.
Andrew Wishart, Senior UK Economist at Berenberg, cautions: "There is a risk they try to push the boundaries, and I think that would be a mistake."
Iran War: Energy Shock Persists, Buffer Running Thin
The Iran war remains one of the most important macro backdrops for markets. Oil and gas prices are swinging wildly as traders gauge the timing and manner of the Strait of Hormuz reopening, benefiting energy stocks while pressuring energy-intensive industries. The resulting inflation uptick is also weighing on government bonds.
The global economy can still absorb high oil prices for now, but the initial shock absorbers are running out. Recent attention has focused on negotiations between Iran and Oman over managing the Strait of Hormuz.
In the US, the average gasoline price has climbed above $4 per gallon due to the war, up from under $3 in January. President Trump said this month that defeating Iran is worth the cost of higher oil prices, though some analysts believe he has an incentive to push prices down ahead of the November midterm elections.
Notably, midterm campaign season traditionally kicks into gear in September, adding uncertainty to policy direction. Gasoline prices have become a central voter concern, and fiscal policy is likewise being pulled by the political cycle.
Mohit Kumar, Chief European Economist at Jefferies, directly links the midterms to Treasury Secretary Scott Bessent's efforts to lower borrowing costs, stating, "The Trump administration cannot afford to see long-end rates rise before the midterms, because mortgage rates are tied to the long end of the Treasury curve."
Analysts suggest this logic means political pressure could, to some degree, shape the coordination between fiscal and monetary policy, with indirect knock-on effects on the bond market.
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