As investors trickle back from summer break and the post-Labour Day grind begins, Bipan Rai—Managing Director and Head of ETF & Alternatives Strategy at BMO Global Asset Management—steps into the spotlight solo1 on the Open Outcry podcast. His mission? To sound the alarm on some of the major macro blind spots that could trip up markets this fall.
In this episode, Bipan Rai goes over some important market and macro-related themes that are playing out right now in the investment space.
“I’ve decided to distill this into five or six themes that I think are going to be incredibly important on a go-forward basis for markets both in the U.S. and Canada ,” Rai explains.
So what’s keeping Rai up at night? From seasonal equity sell-offs to rising inflation risks, fading bond appeal, a shaky U.S. dollar, and the renewed importance of alternatives—his message to investors is clear: don’t get caught flat-footed.
1. September’s Sneaky Pattern: It’s Not Just the Calendar
September has a well-earned reputation as a tricky month for equities—and Rai’s data backs it up. “The S&P 500 has averaged roughly around, let’s call it 1.95 to 1.96% drawdown in the month of September,” he notes. That pattern’s been even sharper since 2020.
But Rai doesn’t buy the idea that it’s just seasonal voodoo. “Equity weakness will usually coincide with the market that’s misinterpreting the Federal Reserve in some manner.” Whether it’s a misread of Jackson Hole or a surprise FOMC decision, the real culprit, he argues, is bad communication between the Fed and the market.
2. The Fed’s Messaging: Investors Might Be Getting It Wrong—Again
Markets are betting the Fed will cut rates by 25 basis points this month—and Rai agrees that’s likely. “This feels like a done deal,” he says. But the problem lies in what comes next.
“The U.S. economy is still expected to deal with firm price pressures… This could be migrating into the services front as well.” Yet the market’s pricing in rate cuts at every meeting after September.
That’s a setup for disappointment. “If [higher inflation] does end up being true, that’s bad news for equities.” Rai says all eyes should be on upcoming jobs and inflation reports, including “nonfarm payrolls, CPI, and PPI,” which could steer the Fed’s tone through 2026.
3. Why Bonds May Not Be the Safe Haven You Think They Are
Despite higher yields, Rai remains skeptical about bonds delivering traditional diversification.
“We remain underweight fixed income… for three reasons,” he says. Let’s break them down:
- Central banks are almost done cutting: “Most of the non-U.S. or even the non-Bank of Japan central banks... are close to the end of their easing cycles.”
- Governments are issuing more debt: “Higher supply means a greater chance of market indigestion… and of course higher term premiums.”
- Politics are interfering with monetary policy: Rai flags Trump’s criticism of the Fed and potential boardroom reshuffles. “There are more and more signs that he may use his position to influence who is selected… potentially even looking at firing some current board members.”
And perhaps most importantly: “Whenever we tend to see core prices in the United States close to or above 3%, those are typically regimes where equities and bonds become more and more correlated. And of course, that’s every portfolio manager’s worst nightmare.”
4. U.S. Dollar Strength? Don’t Count on It
Rai sees cracks forming in the dollar’s dominance.
“We are concerned with the current level of valuation for the U.S. Dollar,” he says, pointing to both trade barriers and political meddling as key factors. “Whenever you tend to see an increase in trade barriers for an economy, that also restricts the potential output… [and] will continue to encourage portfolio outflows.”
His verdict: “Those are powerful arguments potentially for the U.S. Dollar to underperform… including against the euro and the Canadian dollar, over the medium to long term.” Though he does note some near-term risks around French politics for the euro, his broader dollar outlook is clear—downward pressure ahead.
5. Alternatives Are No Longer Optional
As the 60/40 portfolio comes under pressure, Rai argues that investors need to expand their toolkits. “We continue to see alternatives as the most practical diversifier.”
His two favourites?
- Gold: “It’s been an effective diversification instrument… especially if we are correct in our assessment that the valuation of the U.S. Dollar… has further room to correct.”
- Infrastructure: With global economies “circling back to their infrastructure investments,” Rai sees opportunity in assets “tied to long-term revenues that are relatively inelastic.”
And he doesn’t stop there: “When layering that with gold and other potential alternative instruments, including long-short strategies, there are plenty of different avenues for diversification.”
Rai’s Playbook: What He Likes Right Now
Rai doesn’t just diagnose risk—he lays out a tactical roadmap:
- Equities > Bonds: “We continue to prefer equities and alts over fixed income.”
- Sector standouts: Tech, communications, financials, and utilities.
- Geographic tilt: Still bullish on the U.S., but sees a rebound coming for international and emerging markets into 2026.
- Fixed income stance: Underweight overall, but sees Canadian duration outperforming U.S., and favours “short duration with a preference for sub-sovereign exposures.”
- Alt allocation: Doubling down on gold and infrastructure.
- Currency view: Bearish on the U.S. dollar medium term.
Final Thoughts: Stay Sharp, Stay Flexible
“These could change shape,” Rai cautions, “but if we look at the rest of this week… the focal point is going to be the release of nonfarm payrolls on Friday.”
The markets may feel calm on the surface, but under the hood, the engine is running hot. With inflation risks, central bank uncertainty, and geopolitical tensions swirling, Rai’s advice is simple: don’t get too comfortable.
Stay nimble. Stay diversified. And maybe don’t sleep on alts.
Footnote:
1 "The Open Outcry Podcast: What’s behind the recent September sell-off…." BMO ETF Dashboard, 9 Sept. 2025.
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