Wall Street remains fixated on the Federal Reserve’s next decision, and last Friday’s disappointing nonfarm payroll report only strengthened expectations for an upcoming rate cut. But while investors debate the Fed’s timing, many have yet to prepare for how to protect the strong gains they’ve accumulated since April’s low pushed the S&P 500 to record territory.

Normally, a rate cut is considered a bullish signal for stocks. However, the softening job market may also be a warning that the broader economy could be losing momentum.

Global equities are hovering near historic highs. The number of 401(k) and IRA accounts exceeding the million-dollar mark has reached record levels. Flows into equity ETFs continue to rise, and investor sentiment surveys indicate growing optimism — or perhaps overconfidence. According to Todd Sohn, technical strategist at Strategas Securities, such enthusiasm could soon become its own red flag. Still, he believes the market has not yet reached that critical point.

September has already shown some volatility, and historically, it has not been a kind month for stocks. But Sohn predicts that if the real slowdown comes, it will likely occur later in the fourth quarter. “That’s when we could see a bump in the road similar to April’s pullback — maybe smaller, but still noticeable,” he said on CNBC’s “ETF Edge.” For now, though, he sees “no signs of significant risk.”

The market initially rallied to new highs on Friday as traders priced in a potential rate cut, only to retreat by the end of the day. Fed Chair Jerome Powell has hinted that a rate reduction may be near, but this was hardly news to investors. Bryant VanCronkhite, senior portfolio manager and co-head of the special global equity team at Allspring Global Investments, cautioned that markets might be getting ahead of themselves.

Despite weaker labor data, core inflation remains at 3.1% as of July — still comfortably above the Fed’s 2% target. VanCronkhite noted that uncertainties surrounding tariffs and their impact on prices could prompt the Fed to move more cautiously. “There’s still enough flexibility for the Fed to wait for more evidence before making a big policy shift,” he said.

Given the uncertainty around timing and trade policy, both VanCronkhite and Sohn believe investors should use this period to review their portfolios and consider adding defensive positions. This doesn’t require a dramatic overhaul, they emphasized — just thoughtful adjustments that can cushion recent gains in case market conditions worsen.

Below are some key takeaways from their analysis.

1. Tech Concentration Is Still a Problem

Investors have been warned for years that mega-cap tech stocks dominate the S&P 500 — and that dominance has only grown. Sohn pointed out that the eight largest companies now make up nearly 40% of the index.

Nvidia, for instance, saw its sixth loss in seven sessions on Friday and is headed for its weakest week since April. Meanwhile, Alphabet enjoyed strong gains after a favorable court ruling in its antitrust case, pushing tech’s share of the SPDR S&P 500 ETF to 36% — an unprecedented level, according to S&P Dow Jones Indices analyst Howard Silverblatt.

Sohn’s advice is simple: check your portfolio for overlapping exposure. Many investors unknowingly hold core index funds alongside large-cap growth and tech-focused funds, effectively tripling down on the same risk. If market sentiment turns toward value stocks, that overexposure could amplify losses.

While similar warnings have surfaced before — and tech has continued to outperform — the shifting interest rate environment and economic uncertainty make diversification more important than ever.

2. Value and Defensive Plays May Offer the Next Opportunity

Both Sohn and VanCronkhite agree that heading into 2026, investors would be wise to prepare for a possible market rotation toward value-oriented sectors. From a technical standpoint, Sohn sees several corners of the market that have underperformed in recent years, suggesting hidden potential outside of technology.

VanCronkhite echoed this sentiment: “Now is the right moment to start broadening your exposure,” he said. “It doesn’t mean abandoning what has worked, but reallocating some capital from the biggest winners — like tech and financials — into areas that have been overlooked.”

In short, while Wall Street debates the exact timing of a Fed rate cut, the smarter move for investors may be to quietly rebalance. After months of record highs and intense optimism, even a small adjustment toward defense could prove to be the best offense in the months ahead.