Market Commentary

September 2025 Review – Looking Ahead

The S&P 500 climbed higher for three weeks in September. A pullback of 1.3%, over four trading days, couldn’t derail the momentum. The month finished by recouping the four-day swoon.

The sector performance was mixed, again tilting to a concentration in Technology (+7.21%). Communication Services (+5.53%) and Utilities (+3.98%) round out the top sector gainers. Materials (-2.31%) and Consumer Staples (-1.82%) performed the worst in September.

The markets received one quarter point rate cut from the Federal Reserve. Jobless claims represent a cooling labor market that is still resilient. PCE matched estimates, reinforcing the disinflation view and that tariffs are creating one-off pricing pressures.

Analysts see a 3.25% Fed Funds rate target by end of 2026. Perhaps this would be a better number to balance growth and inflation. The 2% Fed Funds target rate seems outdated for neutral. Currently, the rate is 4.09%. The street anticipates two more quarter point rate cuts into year-end. There is room to do so.

S&P 500:                             Sept  +3.53%                     YTD  +13.72%
DOW:                                   Sept  +1.87%                     YTD  +9.06%
NASDAQ:                            Sept  +5.61%                     YTD  +17.34%
Russell 2000:                    Sept  +2.69%                     YTD  +8.97%

Sector Performance YTD:

Communication Services  +23.69%
Consumer Discretionary  +4.74%
Consumer Staples  +2.04%
Energy  +4.27%
Financials  +11.49%
Healthcare  +1.20%
Industrials  +17.07%
Technology  +21.75%
Materials  +7.73%
Real Estate  +3.46%
Utilities  +15.13%

Current U.S. Treasury Yields:

6 Month Bill            3.80%
2 Year Note             3.54%
5 Year Note             3.67%
10 Year Note           4.08%
30 Year Note           4.69%

The Economy and the Fed:

The U.S trade deficit has narrowed as evidenced by the durable goods number printing above estimates. The impact of tariffs won’t show until Q4 numbers with holiday imports and spending.

At the end of September, the market began to anticipate a potential government shutdown. Sure enough, it has come to fruition. Treasury Secretary Bessent spoke this morning and was concerned that a prolonged shutdown may modestly impact GDP. Analysts seem unconcerned of a major hit to GDP.

The publication of governmental data may be off the table for now. However, there is nothing in any delayed releases that would shock markets. We are steadfast in the no recession camp.

Looking Ahead:

We believe that equities will continue to outperform bonds. Q3 earnings are on the horizon, and the street is bullish against Q2 and year-over-year comparisons. The Fed will be easing into a strong economy, advancing higher equity prices.

AI will continue to drive the performance bus. Financials will still move higher, benefiting from lower rates. Energy and Industrials should remain in play with infrastructure build out. There is still $7.28 trillion in Money Market Funds, despite almost $20 billion investing into securities in September.

Our portfolios are positioned with large-cap and quality value and growth equities. As well, we continue to stay U.S. centric with our exposure. We feel the market moves higher into year-end. There will be volatility, but we do not see any violent moves. Staying long equities will reward.