Evelyn Braga
Evelyn Braga
Portugal
8mo
So far, September 2025 proved to be a resilient month for U.S. equity markets, bucking the historical seasonal weakness often associated with the period (where the S&P 500 has averaged a -0.5% return over the past decade). Instead, major indices delivered solid gains, driven by renewed optimism around Federal Reserve rate cuts, resilient economic data, and a broadening rally beyond megacap tech stocks. The month began with record highs amid anticipation of the Fed's policy meeting and ended with a close near all-time peaks, reflecting investor confidence in a "soft landing" scenario despite lingering concerns over tariffs and inflation. Overall, the U.S. equity market advanced approximately 4.1% for the month, contributing to year-to-date gains of around 16%.Key highlights included: Federal Reserve Actions: The Fed implemented its first rate cut of 2025 on September 17, a 25-basis-point reduction to the federal funds rate (target range: 4.25%-4.50%), signaling further easing ahead. This move, coupled with Chair Jerome Powell's comments balancing labor market softness against sticky inflation, boosted sentiment. Markets now price in an 87% chance of another 25 bps cut in October and 71% for December. Economic Data: August CPI rose 0.3% month-over-month (in line with expectations), while personal consumption expenditures (PCE) inflation ticked up to 2.7% annually. GDP growth for Q2 was revised higher to 3.8%, and Q3 nowcasts suggest 3.9% expansion, underscoring economic durability. Sector Rotation and Breadth: Small-cap stocks outperformed, with the Morningstar US Small Cap Index up ~4.6% in August (extending into September), outpacing large-caps. Energy surged nearly 3% for the week ending September 24, led by traditional oil names, while utilities lagged. Tech faced profit-taking amid AI sustainability doubts, but the broader market saw advancing issues outnumber decliners 2:1 on the NYSE. Corporate Earnings and Events: Q3 earnings kicked off positively, with firms like Micron beating guidance despite a 1% share dip. Tariffs announced by President Trump (e.g., 100% on branded drugs, 25% on heavy-duty trucks) had muted impact, as markets focused on trade deal progress. Volatility and Milestones: The VIX averaged ~19, normalizing from April's tariff-induced spike. The Dow crossed 46,000 mid-month for the first time, and the S&P 500 notched nearly 30 records in 2025 overall.
Not investment advice. The author may have financial interests in the mentioned instruments.
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