Market Recap: September 2025

Market commentary

• The U.S. economy continues to navigate a complex environment, showing resilience in key areas like consumer spending and technology-driven capital investment.
• Second quarter GDP, buoyed by consumer spending, was revised upward to +3.8%.
• Hiring remains subdued, with termination rates holding steady. Employment conditions are currently stable, but potential government layoffs may lead to a temporary uptick in the October unemployment rate.
• Expected additional monetary easing by the Fed is accompanied by heightened scrutiny of fiscal policy and potential disruptions from a government shutdown.

Select economic and market data

Equities

• The stock market shrugged off its usual September weakness, delivering solid gains on the back of easier monetary policy and strong tech sector performance.
• The Technology and Communication Services sectors drove markets higher, marking five straight monthly gains for the S&P 500 and six for the NASDAQ.
• Emerging Market equities led returns for the month and YTD as the U.S. dollar continued to soften versus EM currencies.

Fixed income

• Bond yields dropped, most notably on longer maturities, as markets both anticipated and reacted to Fed easing, delivering a month of strong fixed-income performance.
• Investors flocked to quality, with treasuries, mortgage-backed securities, and investment-grade corporates leading performance.

Strategic outlook

• Some caution is warranted on equities in the near term, particularly in large-cap stocks with above-average valuations; currently favoring small-cap and mid-cap domestic stocks longer-term.
• Near-average expected returns are projected for fixed income with the Fed on pause and rates reflective of conditions.
• Above-average volatility is likely given central bank involvement and geopolitical uncertainty.