September Market Update

September Recap

The S&P 500 rose 3.7% in September, hitting several new all-time highs and marking its fifth straight positive month.¹ Big Tech stocks led the gains on the back of strong earnings and continued AI development. The benchmark 10yr Treasury yield ended lower, finally breaking below the 4.2% level as investors now expect three total rate cuts in 2025.² 

Due to the ongoing government shutdown, September’s inflation and labor market reports have been delayed. Expectations are for 3.1% inflation, 40k jobs added, and the unemployment rate remaining at 4.3%.³ This would send inflation back above 3% for the first time since May 2024, another setback given that price growth has remained above the Federal Reserve’s 2% target for more than four and a half years now (figure 1).



The Federal Reserve delivered the first rate cut of 2025 on the 17th, with Chair Jerome Powell characterizing the move as a ‘risk-management cut’ in the face of a weakening labor market.⁴

Current Developments (October)

On October 1, the government shut down over disagreements regarding healthcare funding. As of day 14, it has already become the 5^th longest shutdown since 1976.⁵ Despite the political noise, stocks have historically held up well during shutdowns and performed even better afterwards (figure 2).



President Trump recently threated 100% tariffs on China following China’s announcement of further rare earth export controls.⁶ Markets initially dropped on the news but rebounded after Trump hinted that a deal is likely to be reached before the November 1 deadline. 

A baseline 10% tariff and tariffs on key trading partners like Canada (35%), Mexico (25%), India (50%), and Brazil (50%) remain in effect, while deals including 15% tariffs on most goods have been struck with Japan and the EU.⁷ 

The Future

After another quarter of double-digit earnings growth in Q2, S&P 500 earnings are expected to rise 8% in Q3.⁸ October is historically a mediocre month for stocks, but November and December typically deliver strong gains.⁹

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Both Wall Street and the Federal Reserve continue to project two additional interest rate cuts in 2025, following the one in September.¹⁰ This would bring the federal funds rate down to a range of 3.50%-3.75% by the end of the year.

1. https://ycharts.com/indices/%5ESPXTR, https://ycharts.com/indices/%5EDJITR, https://ycharts.com/indices/%5ENACTR, https://ycharts.com/indices/%5ERUTTR, https://ycharts.com/indices/%5EMSEAFETR, https://ycharts.com/indices/%5EBBUSATR – Index Performance 

2. https://www.cnbc.com/bonds/ - Bond Yields

3. https://www.investing.com/economic-calendar/ - Economic data 

4. https://www.cnbc.com/2025/09/17/fed-rate-decision-september-2025.html - Fed rate cut

5. https://www.ncsl.org/in-dc/federal-government-shutdown-what-it-means-for-states-and-programs- Government Shutdowns

6. https://www.theguardian.com/us-news/2025/oct/14/china-us-world-economy-trump-tariffs – China Tariffs

7. https://www.atlanticcouncil.org/programs/geoeconomics-center/trump-tariff-tracker/ - Tariffs

8. https://advantage.factset.com/hubfs/Website/Resources%20Section/Research%20Desk/Earnings%20Insight/EarningsInsight_101025.pdf - Earnings

9. https://www.nasdaq.com/articles/heres-the-average-stock-market-return-in-every-month-of-the-year – Monthly market history 

10. https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html – Investor rate expectations 

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