Oct 14 2025 15:00
What September's Economic Trends Mean for Your Portfolio
This September brought remarkable movement in the markets, with stock indexes scaling new heights as the U.S. economy showed impressive resilience. Fresh government data highlights robust GDP growth and persistent consumer spending strength, despite ongoing concerns about inflation trends and Federal Reserve policies.
The Federal Reserve's anticipated interest rate cut aimed to bolster growth while monitoring price pressures closely. Wall Street is on high alert, and so are we.
Today, we're diving into the latest economic data, the Fed's actions, and what these might mean for your portfolio this fall. Our mission remains unchanged: to keep you well-informed and strategically positioned as we navigate the upcoming months.
Main U.S. Stock Indices
September saw a surge in U.S. stocks, with the S&P 500 hitting new all-time highs around 6,700. The recovery was led by small-cap and value stocks, fueled by reduced rates and domestic growth. Key gains were evident in technology, communications, and consumer discretionary sectors.
Here's a monthly breakdown:
- The S&P 500 rose by 3.53%.
- The Nasdaq 100 surged by 5.40%.
- The Dow Jones Industrial Average increased by 1.87%.
Growth & Consumer Expenditure
In Q2, the U.S. GDP surged to a 3.8% annual rate, marking the strongest expansion in almost two years after substantial upward revisions. This momentum was largely driven by steadfast consumers whose spending grew by 0.6% in August, exceeding expectations and spreading across retail, travel, and durable goods, even in the face of rising tariffs and inflation.
Business investment remains varied. Housing expenditures declined by 5.1% as residential fixed investment cooled, highlighting continuing softness in the sector. Meanwhile, corporate demand for equipment and services remained steady, reflecting a commitment to productivity, even as broader capital expenditures stayed restrained.
Trade added further momentum in Q2 as a significant drop in imports narrowed the deficit and bolstered domestic growth. This trend mirrored earlier inventory adjustments and ongoing tariff effects, providing a buffer for the U.S. economy amid global uncertainties.
For the time being, consumer spending may continue as a pillar of growth, given signs of waning in housing and government expenditures. Resilient households are currently maintaining the recovery trajectory, though investors should be wary of pressures that could challenge this momentum as the year draws to a close.
Fed Policy Adjustments
In September, the Fed lowered rates by 25 basis points, adjusting the federal funds target to between 4.00-4.25%. Policymakers considered a larger cut of 50 basis points, weighed by debates over persistent inflation and rising labor market slack.
The Fed's September economic outlook raised growth projections and suggested further cuts into late 2025 and early 2026 but emphasized a “data-dependent” approach. The Federal Open Market Committee's dot plot indicated a consensus for at least one more cut before year-end.
Mortgage rates, just above 6%, are projected to decline through year-end, making home purchases and refinancing more accessible and stimulating stronger demand from households and businesses as borrowing costs decrease.
Lower Fed rates are also anticipated to reduce financing expenses for businesses, especially for operating loans and commercial real estate, liberating capital for expansion and hiring. This improved credit climate provides a timely boost for small businesses and corporations planning major initiatives for 2026.
Labor Market & Inflation Dynamics
Job growth in the U.S. diminished sharply in August, with just 22,000 jobs added, while unemployment stabilized at 4.3%, a four-year peak. Hiring remains focused on healthcare, with demand for senior roles surpassing that for junior positions.
Inflation persists at a 2.9% year-over-year rate, with core prices rising 3.1%. Wage increases of 3.7% are barely keeping pace with rising costs, leaving many consumers feeling pinched. Through the second quarter, the top 20% of earners accounted for about half of all spending.
Federal Reserve Chair Jerome Powell faces a balancing act: the slowing labor market mitigates pressure for aggressive inflation management, yet continual price hikes are straining household budgets and economic sentiment. Any significant shifts in employment or inflation data could prompt further monetary policy adaptations—or unsettle investors in the coming months.
Navigating the Economic Landscape
September concluded with the U.S. economy displaying steady momentum despite ongoing discussions of inflation and interest rates. Stock markets achieved new highs, buoyed by strong consumer spending, optimism over Fed rate cuts, and a sector shift into technology and value stocks. However, a potential government shutdown at the start of October added an element of risk to the stock markets on the first morning of the month.
Though markets evolve swiftly, you don't have to face them alone. Contact our team today with any questions or concerns.