top of page
Search

ree

Executive Summary

  • Equity markets continued to advance through September, as many equity indexes, including international and emerging markets indexes, ended the month near all-time highs.

  • US economic growth has also rebounded from earlier this year, with upward revisions to second quarter growth and positive projections for third quarter growth.

  • After holding Federal Funds rates steady for months, the Federal Reserve moved forward with a quarter percent interest rate cut in September, despite Fed Chair Powell pointing out the challenge of the Fed’s dual mandate.

  • However, the US federal government shut down after lawmakers were unable to reach an agreement on funding by its September 30 deadline, creating uncertainty about non-essential employees and the lack of availability of economic data reporting.

Markets Continue to Climb

Equity market advanced again last month, with many equity indexes closing the third quarter at or near all-time highs.  As you’ll see below, the rally extends beyond just large- and small-cap US stocks (as represented by the S&P 500 and Russell 2000 indexes), as international and emerging markets stocks (MSCI EAFE and MSCI Emerging Markets indexes, respectively) have also participated.  In fact, international and emerging market stocks have led the way thus far in 2025, with year-to-date returns of approximately 25% and 27%, respectively.[1] 


ree

Many of the Magnificent Seven market darlings, companies such as Nvidia, Microsoft, Alphabet, and Meta, continued to help lead the market higher through the first three quarters of the year, as each has climbed 20% or more.  However, a new cohort of artificial intelligence related companies, such as Broadcom, Palantir, and Oracle (up 43%, 70%, and 141% year-to-date, respectively), are growing quickly and may represent a broadening out of the AI story.[2]  As we mentioned in previous pieces, concerns over the level of capital expenditures on AI data centers and how companies plan to monetize AI remain.  However, that narrative has been overshadowed so far this year.

 

While stocks get most of the attention, they are not the only asset class that advanced through the first three quarters of the year.  Both US bonds and global bonds have also climbed throughout 2025, with the Bloomberg US Aggregate index up 6% and the Bloomberg Global Aggregate index up nearly 8%.  Not to be outdone, gold (as represented by the S&P GSCI index) has gained approximately 47% year-to-date.[3]

 

Economic Update –The Fed Makes a Move & Growth Rebounds

The highly anticipated Federal Reserve (Fed) meeting occurred in mid-September, resulting in a 0.25% reduction in the Federal Funds rate as most expected.  This marks the first reduction in interest rates in nine months, as the Fed chose to hold steady through the announcement and implementation of US tariffs earlier this year. 

 

Fed Chair Powell explained the current situation as challenging, however, as the Fed’s dual mandate – maintaining full employment and stable prices – appear to be at odds with one another.  However, he stated that the softening in the labor market outweighed the risk posed by sticky inflation.  While inflation remains well-above the Fed’s 2% target, it has not accelerated upward since the Liberation Day announcement as many feared.[4] 

 

The Fed’s outlook going forward is much less certain.  When asked where the federal funds rate should be at year-end, FOMC forecasts ranged from 0.25% higher than the current rate to 1.25% below the current rate.  Similarly, there is a great deal of dispersion in forecasts over the longer run, as well (see below).[5]


ree

On a positive note, US economic growth numbers look to have rebounded from a slow first quarter of the year.  The second quarter Gross Domestic Product (GDP) was revised higher to 3.8%, which represents the strongest quarter in nearly two years.  Consumer spending on restaurants, health care, insurance, and transportation all helped the economy this spring.  As did AI data center spending, which was estimated at over $40 billion in Q2.[6]  As a result, we modified the Dashboard by shifting Growth to positive (from neutral) and moving the Economy dial up one notch.

 

Government Shutdown

Republicans and Democrats were unable to reach an agreement on federal spending by the September 30 deadline, forcing the first government shutdown since 2018-2019.  In this scenario, federal functions vary based upon whether they are deemed to be essential or non-essential.  Essential employees continue to work, while those deemed non-essential do not.  However, neither group will get paid during the shutdown.  There has been a long-standing practice of paying both groups retroactively after the shutdown ends and this was codified in the Government Employee Fair Treatment Act of 2019.[7]


ree

Shutdowns have become increasingly common in recent decades, but they come at a real cost.  For example, the Congressional Budget Office estimates about 750,000 employees will be furloughed, costing approximately $400 million per day in lost wages.  However, the stakes appear to be even higher during this shutdown, as the Trump administration is considering firing thousands of federal workers to reduce the government workforce.[8]  All of this is playing out right as approximately 150,000 federal employees that accepted the deferred resignation program offered by the Department of Government Efficiency earlier this year officially exit government employment.[9]

 

In addition to the uncertainty around funding and the employment status of non-essential federal workers, the shutdown also means that organizations like the Bureau of Labor Statistics (BLS) and the Census Bureau will pause operations.  Those organizations produce many of the key economic reports that the Federal Reserve and others rely upon when making economic decisions (see below).[10]  Delays in those reports, if the shutdown isn’t resolved soon, only make decision-making more challenging for Fed officials and other policymakers (the next Fed meeting is scheduled for October 28-29).


ree

The Path Forward

We are now through three quarters of the year and 2025 has been another good year for most asset classes so far.  Many uncertainties and challenges remain, however, so we continue to advocate for diversification while we observe how the events and stories shaping markets unfold.  We appreciate your continued trust and welcome the opportunity to speak with you in greater detail in the context of your specific situation.


[1] Source: YCharts through September 30, 2025

[3] Source: YCharts through September 30, 2025


Important Information

All investments contain risk and may lose value.  Past performance is not an indication of future performance.  Information contained herein has been obtained from sources believed to be reliable but not guaranteed. This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product.

 

Statements concerning financial market trends or portfolio strategies are based on current market conditions, which will fluctuate.  There is no guarantee that these investment strategies will work under all market conditions or are appropriate for all clients and each client should evaluate their ability to invest for the long term, especially during periods of downturn in the market.  Outlook and strategies are subject to change without notice.

 

Certain third-party sources cited in this material may require a paid subscription or may otherwise be located behind a paywall. If you would like more information regarding any cited source, please contact IRP and we will provide additional details upon request.


ree

Click below to watch our October 2025 Market Outlook video


Subscribe to our email list to receive our whitepaper:

5 Essential Strategies You Should Be Implementing as a Business Owner

Untitled design (9).png
bottom of page