Tech stocks are starting September under pressure, a sharp reversal from the record-setting highs that closed out the summer.
The sector is facing multiple headwinds that have pushed the Nasdaq lower, reminding advisors and investors that volatility remains a persistent feature of today’s markets.
On Tuesday, the Nasdaq 100 dropped as much as 1.9%, led by notable declines in bellwether names like Nvidia and Amazon, which both lost about 2%. The broader market also struggled: the S&P 500 fell 0.7%, the Dow dropped 0.6% (249 points), and the Nasdaq Composite slid 0.8%. For RIAs and wealth managers, the pullback raises important considerations about client portfolio positioning, particularly for those with concentrated tech exposure.
While September is historically a weak month for equities, three key forces are intensifying the pressure on tech stocks: trade policy uncertainty, questions about Federal Reserve independence, and a rapid rise in Treasury yields.
1. Trade policy remains unsettled
The tariff roller coaster continues to generate uncertainty, creating ripple effects across sectors that rely heavily on global supply chains. A federal appeals court recently ruled that several of the tariffs enacted by the Trump administration were unlawful, suggesting that the executive branch overstepped its authority. While the administration plans to appeal, the ruling leaves markets in limbo.
Until the Supreme Court issues a final judgment, tariffs remain in place, forcing investors and businesses to navigate an uncertain environment. For advisors, this legal and policy uncertainty complicates client asset allocation decisions, as tariffs can directly impact margins for technology companies with international exposure. Clients should understand that even if long-term fundamentals for tech remain strong, short-term volatility is likely to persist.
2. Fed independence under scrutiny
At Jackson Hole, Fed Chair Jerome Powell hinted at the possibility of interest rate cuts, sparking optimism and fueling a late-summer rally. But that optimism has since been tested. Recent political moves—including efforts by the administration to challenge Fed Governor Lisa Cook’s position—have reignited concerns about the central bank’s independence.
Markets dislike uncertainty, especially when it comes to the Fed’s direction. For advisors, this dynamic underscores the importance of maintaining diversified allocations and preparing clients for policy-driven swings. Even if rate cuts materialize later this year, the path forward is less clear than it seemed in August. Advisors should counsel clients not to overreact to short-term headlines but to recognize how political interference could disrupt monetary policy expectations.
3. Rising Treasury yields pressure growth stocks
Perhaps the most immediate headwind is the surge in bond yields. The 30-year Treasury yield has climbed toward 5%, its highest level in years, while the 2- and 10-year yields are also moving higher. Rising yields weigh heavily on growth stock valuations because they increase the discount rate used in pricing future earnings.
Tech companies, which are valued heavily on their long-term growth prospects, are particularly vulnerable in this environment. Advisors should revisit duration risk across portfolios and consider how higher yields may challenge growth-heavy allocations. For some clients, adding exposure to shorter-duration fixed income or rebalancing into more defensive equity sectors may provide a cushion.
Key takeaway for RIAs
The early-September pullback in tech is a reminder that market leadership can shift quickly, especially when macroeconomic and policy factors converge. Advisors should prepare clients for continued volatility, highlight the risks of concentration in high-growth names, and emphasize the value of diversification. While long-term fundamentals in technology remain intact, the near-term environment favors a more balanced approach that can withstand both policy uncertainty and rising interest rates.
