Market Update: September 22nd, 2025

Financial Markets

Stocks notched new all-time highs last week as investors welcomed the Federal Reserve’s first rate cut in nine months. Strength in technology stocks powered the rally, with the Nasdaq Composite up 2.21%, the S&P 500 gaining 1.22%, and the Dow Jones Industrial Average rising 1.05%.

Market News

First Rate Cut of the Year. The Federal Reserve delivered its first interest-rate cut since December 2024 at last week’s September policy meeting, trimming the target rate range by 25 basis points to 4.00%–4.25%. The decision was nearly unanimous, with only newly confirmed member, Stephen Miran, dissenting in favor of a larger 50 bps rate cut.

The move was widely anticipated, but the Fed’s latest Summary of Economic Projections (SEP) provided fresh insight into the path ahead. Policymakers now expect roughly 50 basis points of additional rate cuts by year-end, putting the median year-end funds rate around 3.6%, more than 30 bps below June’s forecast.

Inflation estimates for the remainder of 2025 were steady, though the committee nudged its 2026 PCE inflation projection up to 2.6%. Labor-market expectations were unchanged, with unemployment still seen climbing to 4.5% by year-end, a key factor supporting the cut.

On broader economic growth, the Fed raised its GDP outlook for 2025 and 2026 by 0.2 percentage points, to 1.6% and 1.8%, respectively, still below long-term trends but an encouraging revision.

Source: Federal Reserve Summary of Economic Projections

Overall, the Fed maintained a measured stance, balancing lingering inflation risks with signs of labor-market softening. The tone and openness to easing monetary policy reassured investors, helping push U.S. equity indexes to fresh highs last week.

Resilience in August’s Retail Sales Data

U.S. retail sales topped expectations in August, climbing 0.6% from the prior month and 5% from a year earlier. The gain reflected a mix of solid consumer demand and inflation impacts.

Spending showed notable strength online, with nonstore retailers, largely e-commerce, rising 10.1% year over year and advancing 2% in August alone. Restaurants also posted healthy growth, with sales up 0.7% on the month and up 6.5% compared to August 2024, underscoring Americans’ preference for dining out and experiential spending.

General merchandise stores were a soft spot, slipping 0.1% in August and posting a slower 1.9% annual increase. Overwhelmingly though, August figures suggest consumer spending remains resilient, even as other parts of the economy begin to show signs of cooling.

Source: US Census Bureau

Leading Indicators

The Conference Board’s Leading Economic Index (LEI) slipped 0.5% in August, the largest monthly drop since April. Most non-financial components, along with the yield spread, drove the decline.

Persistent weakness across the index’s elements and a negative growth rate over the past six months triggered the LEI’s recession signal once again in August. The leading credit index and the S&P 500 were the only notably positive contributors, while softness in consumer expectations, a pullback in new orders, slower building permits, lower manufacturing hours, and higher unemployment claims weighed on the index.

The report highlights a growing divergence among leading indicators. Equity markets, which are inherently forward-looking, have rallied sharply since April’s lows, while composite indexes such as the LEI have continued to point to a more severe slowdown or recession.

Source: The Conference Board

Potential for a Move to Semi-Annual Earnings Reporting

President Donald Trump last week raised the idea that U.S. public companies could move away from quarterly earnings reports in favor of a semiannual schedule. While no decisions have been made, the Securities and Exchange Commission is discussing the idea.

Many other developed markets, including the U.K. and the European Union, already require only twice-yearly reporting. Proponents argue that reducing the frequency of earnings releases could lower compliance costs and allow management to focus on long-term strategy rather than the pressure of meeting Wall Street expectations four times a year.

On the other hand, a study by the CFA Institute found that when the U.K. required quarterly reporting (a rule no longer in place), it was associated with greater analyst coverage and more accurate earnings forecasts. Quarterly reporting also provides investors with timely information to assess a company’s financial health.

Time will tell whether the SEC decides to explore this idea further, but any move toward semiannual reporting requirements could have a substantial impact on the cadence of U.S. capital markets.

Source: Wall Street Horizon

Summary

Markets made new highs last week after the Fed’s first rate cut in nine months, helped by strong retail sales and a tech-led rally. Leading indicators, however, continued to soften, hinting at slower momentum even as equities price in resilience. Conversation also grew over the future of quarterly earnings reports, with regulators potentially discussing a move to less frequent reporting.

We appreciate your continued trust.

Thank you,

Joseph M. Maas,
CFA, CFP®, ChFC, CLU®, MSFS, CCIM, CVA, ABAR, CM&AA

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