Weekly Market Update – September 19, 2025

Quick Takes

• Following nine months of inaction, the Federal Reserve delivered a long-awaited quarter point interest rate cut on Wednesday—and signaled more to come. The median projection of the Summary of Economic Projections, or dot plot, shows two additional cuts in 2025.
• All major US indexes posted a third consecutive weekly gain, with the S&P 500 up +1.2%, and the technology-heavy Nasdaq Composite and small cap Russell 2000 each gaining +2.2%. On Thursday, the Russell joined the S&P and Nasdaq in closing at all-time highs.
• Bond investors weren’t nearly as optimistic as stock investors. US Treasury yields rose on Wednesday, Thursday, and Friday, resulting in negative bond returns for the week (bond prices fall when Treasury yields rise). The Bloomberg U.S. Aggregate Bond Index was down -0.2%.

Source: Bloomberg. Data as of September 19, 2025.
Price Returns for Equity, Total Returns for Bonds.
* The term basis points (bps) refers to a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 0.01%. Bond prices and bond yields are inversely related. As the price of a bond goes up, the yield decreases.

Stocks Rise as Fed Delivers Rate Cut and Signals More to Come

The stock market is on a hot streak, and the Federal Reserve just gave it another boost. By delivering a long-awaited interest rate cut on Wednesday—and signaling more to come—the Fed helped stocks extend their winning ways. All major US indexes posted a third consecutive weekly gain, with the S&P 500 Index up +1.2%, and the technology-heavy Nasdaq Composite Index and small cap Russell 2000 Index each gaining +2.2%. The Fed cut the benchmark borrowing rate by 0.25% on Wednesday, after taking no action for nearly nine months. Traders are now anticipating additional rate reductions in October and December. The median projection of the Fed’s Summary of Economic Projections, or dot plot, also penciled in two additional cuts in 2025. A declining rate environment benefits smaller companies, which tend to have more floating-rate bank loans and shorter-term debt, and on Thursday, the Russell 2000 joined the S&P 500 and Nasdaq in closing at fresh all-time highs. It was the first time the Russell has notched a record high since November 2021, which was also the last time all three indices closed at all-time highs together. The inclusion of the small caps benchmark at record highs is a testament to how broad this rally has become. 

In another sign, last week’s rate cut boosted investor confidence, and appetite for risk, credit spreads—the premium that investors demand to hold investment-grade-rated companies’ bonds instead of low-risk US Treasurys—hit its lowest level since 1998 (see Chart of the Week below). However, bond investors weren’t nearly as optimistic about the Fed as stock investors were. Treasury yields rose on Wednesday, Thursday, and Friday, resulting in negative returns for the week (bond prices fall when Treasury yields rise). Fed Chairman Jerome Powell characterized the rate cut as a “risk management move” meant to preempt further softening of the labor market, and his comments seemed to be viewed as more hawkish than anticipated, somewhat contradicting the more dovish than expected dot plot. The 10-year yield and 30-year yield each ended the week up +6 basis point at 4.13% and 4.74% respectively. The 2-year Treasury yield rose +2 basis points to 3.57%. The Bloomberg U.S. Aggregate Bond Index returned -0.2% for the week, and the Bloomberg Global Aggregate ex U.S. Bond Index (non-U.S. bonds) return was flat for a second straight week.

Aside from the Fed, geopolitics grabbed some of the spotlight last week. President Donald Trump held a phone call with China’s Xi Jinping on Friday, calling it a “very productive” conversation and agreeing to visit Xi in China next year. Trump said the leaders had approved a deal for a US version of TikTok, seeming to relieve the uncertainty around TikTok in America. Congress passed a law in 2024 requiring ByteDance, TikTok’s Chinese parent company, to divest its US operations by January 2025 or face a ban, but President Trump has repeatedly delayed enforcement through executive orders, with the latest extension pushing the deadline to December 16, 2025. However, details around the arrangement were sparse. Speaking to reporters later Friday, Trump said details still needed to be worked out around TikTok’s algorithm, which drives TikTok’s recommendation engine—what many see as the app’s secret sauce. 

It is slow on the earnings front, but FedEx was one of the few, and biggest, names reporting last week. The parcel delivery giant is seen as a global economic bellwether, and on Thursday, it announced strong growth in both revenue and earnings. That reinforces the narrative of a resilient consumer and followed Tuesday’s report by the Commerce Department that retail sales increased by a stronger than expected +0.6% in August, the third consecutive month of positive readings.

Chart of the Week

Wall Street is riding high as the Federal Reserve fuels a 2021-like risk-on rally. The Fed’s quarter point interest-rate cut on Wednesday has further extended the market’s rally, with global equities hitting record highs and credit spreads tightening to 27-year lows. The rally has been driven by a combination of a resilient consumer, a boom in Artificial Intelligence, greatly reduced fears of a tariff calamity, and a continued expansion of economic activity. Despite concerns about inflation reemerging and the potential for a Fed-fueled bubble, most investors seem to believe the rally has legs. Importantly, the rally has been broad-based, as demonstrated on Thursday when the small cap Russell 2000 Index finally joined the large cap indices like the S&P 500 and Nasdaq Composite, in setting a new all-time high—its first since November 25.

Investor Risk Appetite is Growing

Small Caps Join the All-Time High Parade as Credit Spreads Sit at 1998 Lows

Source: Bloomberg.

The Week Ahead

The economic calendar is busier this week with an inflation update from the Bureau of Economic Analysis on Friday with the release of the Personal Consumption Expenditures (PCE) Price Index. While Federal Reserve Chair Jerome Powell made it clear at last Wednesday’s press conference that the slowing labor market is a more immediate concern, he said there’s no “risk-free path” for the Fed as inflation is still above its 2% target. Housing data includes weekly MBA Mortgage Applications and New Home Sales on Wednesday and Existing Home Sales on Thursday. More consumer activity is reported with Personal Income & Spending as well as Consumer Sentiment on Friday. Insights on national economic activity will be provided with the Chicago Fed National Activity Index (CFNAI) on Monday and S&P Global’s Manufacturing and Services Purchasing Managers’ Indexes (PMIs) on Tuesday.

Did You Know?

INSURANCE KEEPS RISING – After surging +8.3% in 2024, average annual home insurance premiums hit another record high in June, rising to $6.19 for every $1,000 in coverage. Average single-family mortgage holders now pay about $2,370/year for property insurance, accounting for a record 9.6% of total mortgage-related expenses. (Source: ICE Mortgage Monitor)

CRISIS OF CAPITALISM – Only 54% of Americans have a positive view of capitalism, the lowest level since at least 2010, while a record 39% have a positive view towards socialism. Along party lines, 74% of Republicans have a positive view of capitalism compared to 42% of Democrats. (Source: Gallup)

RATE CUTS NEAR HIGHS – Since 1994, when the FOMC started announcing its policy decisions on the day of the meeting, there have been eight rate cuts that occurred within two weeks of the S&P 500 hitting a 52-week high. All eight times, the S&P 500 ended up higher one year later, with a median gain of +14.5%. (Source: Bespoke)

This Week in History

WALL STREET BOMBED – On September 16, 1920, Wall Street was bombed. At the time, it was the deadliest terrorist attack in the US. At one minute past noon, a bomb hidden in a horse-drawn wagon on Wall Street—close to J.P. Morgan, Bankers Trust, and the US Assay office—killed 38 people and injured several hundred others. It was the first time ever that trading was halted on the floor of the New York Stock Exchange because of violence. The previous day, anarchists Sacco and Vanzetti had been indicted for bank robbery and murder. No one knows who carried out the attack, but it was assumed to have been orchestrated by an Italian anarchist group as retribution for the indictments. (Source: The Wall Street Journal)

Economic Review

• The Commerce Department reported that the advanced read on US Retail Sales for August showed a rise of +0.6%. That was well above Wall Street expectations for a +0.2% increase and unchanged from the prior month after being revised higher from +0.5%. Retail sales represent about one-third of all consumer spending and offer clues on the strength of the economy. Retail Sales Ex-Autos jumped +0.7% for the month, following a +0.4% increase the prior month after being revised up from +0.3%. That was above expectations for +0.4%. Auto sales account for one-fifth of all retail sales. Sales Ex-Autos and Gas rose +0.7%, above expectations for a +0.4% rise and up from a +0.3% the prior month (revised up from +0.2%). The Control Group, a figure used to calculate Gross Domestic Product (GDP), increased +0.7%, above expectations for a +0.4% increase and up from +0.5% the prior month (unrevised). Growth was led by nonstore retailers (online sales), apparel stores, sporting goods and hobby stores, and restaurants. Those easily offset milder declines by miscellaneous store retailers, department stores, and furniture stores. The bottom line is that the report showed consumer spending is still healthy despite higher prices accounting for some of the increase (retail sales are not adjusted for inflation).  
• The Conference Board Leading Economic Index® (LEI) declined by -0.5% in August to 98.4, after improving +0.1% in July (after being revised higher from -0.1%). That was worse than Wall Street expectations for a -0.2% decline. It was the largest monthly decline since April. Breadth of the index was poor, with just 3 of the 10 indicators tracking positive for the month, while six were negative and one was unchanged. The decline was driven again by a sharp drop in Consumer Expectations of Business Conditions which contributed the largest decline of -0.19 for a second straight month, and -0.22 and -0.24 the two months before that. Manufacturing New Orders (-0.08) was weak again, as were Building Permits (-0.11) and Average Weekly Hours (-0.12). Stock Prices led the gains with a +0.07% advance following the +0.17% jump the prior month. The Conference Board Coincident Economic Index® (CEI) rose by +0.2% to 115.0, a new all-time high. The Conference Board Lagging Economic Index® (LAG) ticked up +0.1% to 120.0 after being unchanged the prior two months. 
• U.S. Industrial Production increased +0.1% for the month of August, above expectations for a flat reading and up from the -0.4% decrease the prior month (revised down from -0.1%). Manufacturing Production was up +0.2%, well above expectations to fall -0.2% and up from -0.1% the prior month (after being revised lower from 0.0%). Manufacturing represents about three-quarters of total Industrial Production. Year-over-Year, Industrial Production was up +0.9%, following the prior month’s +1.3% annual pace. Capacity Utilization ticked down to 77.4%, in line with Wall Street expectations and unchanged from the prior month after being revised lower from 77.5%. Capacity Utilization reflects how much a manufacturing plant is being used to produce things. The key takeaway from the report is that industrial production was driven by motor vehicles and parts in August. 
• Imports Prices were up +0.3% in August, far above expectation for a -0.2% decline, and up from a +0.2% increase the prior month (revised lower from +0.4%). Import Prices ex Petroleum were up +0.2%, up from a flat reading the prior month (after being revised lower from 0.3%) and above expectations for +0.1%. Year-over-year, the cost of imports was flat, matching expectations, and up from the prior month’s -0.6% annual rate after it was revised down from -0.2%. Meanwhile, Export Prices were up +0.3%, above expectations for +0.1% and unchanged from the prior month (after being revised up from +0.1%). Export prices accelerated to +3.4% over the past year, from last month’s +2.4% annual rate (revised up from +2.2%).
• The Philly Fed Manufacturing Business Outlook Survey jumped +23.5 points to +23.2 in September, its highest reading since January. That was far above Wall Street forecasts for a +2-point increase to +1.7. Readings above zero indicate economic expansion and below zero signal economic contraction. The indexes for New Orders rose +14 points +12.4 and Shipments rose +22 points to +26.1. The Employment index was little changed at +5.6, down slightly from +5.9. Both inflation gauges decreased, with Prices Paid and Prices Received down -20 points to +46.8 and -17 points to +18.8, respectively. The diffusion index for future general activity rose +7 points to 31.5 in September.
• The New York Fed’s Empire State Manufacturing Index, a gauge of manufacturing activity in the state, sank more than -20 points to -8.7 in September from +11.9 in August. Demand has backtracked meaningfully, with the New Orders and Shipments indexes declining more sharply than they have in nearly a year and a half, plunging -35.0 and -29.5 points to -19.6 and -17.3, respectively. The Employment index fell -5.6 points to go negative (-1.2) for the first time in four months. The outlook wasn’t very optimistic either, with the Six Months Ahead General Business Conditions index sliding -1.2 points to +14.8, its lowest level since May. The only silver lining in the report was on the inflation front, with Prices Paid and Prices Received falling -8.0 and -1.3 points respectively.
• August Housing Starts decreased -8.5% month-over-month to a seasonally adjusted annual rate of 1.307 million units, missing expectations for a -4.4% drop to 1.365 million units. That compares to a +3.4% rise, or 1.429 million units from the prior month (revised higher from 1.428 million units). Single-unit starts were down -7.0%, compared to a +3.5% increase the prior month. Multi-family units were down -11.7% after a +3.3% bump the prior month. Housing starts peaked at 1.8 million in April 2022. Regionally, new construction single-unit starts were down -17.0% in the South, but up +42.3% in the Northeast, +8.2% in the Midwest, and up +1.6% in the West. Moving to Building Permits, one of the leading indicators tracked by the Conference Board and indicator of future construction activity, they fell -3.7% to an annualized rate of 1.312 million units. That fell short of expectations for 1.370 million units and compared to the prior month’s unrevised -2.2% decrease to 1.362 million units. Single-unit permits fell -2.2%, while multi-family units were down -6.4%. Regionally, single-unit permits rose +1.6% in the Midwest, but fell -1.5% in the South, -1.8% in the Northeast, and -6.9% in the West. The bottom line is that single unit starts and permits were weak and reflect the challenges of affordability, particularly the -17% plunge for home starts in the South—the nation’s largest homebuilding region—show much strength, which is needed for more affordable single-family homes for sale.
• Homebuilder confidence held steady in September as the National Association of Home Builders (NAHB) Housing Market Index (HMI) was unchanged at 32. A year ago, the index stood at 39. The index is based on a 0-to-100 scale, where any number over 50 indicates a good reading, and below 50 is considered negative sentiment. Sentiment has been in negative territory for 16 months in a row. The Current Sales component was unchanged at 35, while Sales Expectations in the Next Six Months was up +2 points to 45, and Traffic of Prospective Buyers slipped -1 point to 21. For the month, 39% of builders reported cutting home prices, which is the highest level in the post-Covid period and was up from 37% the prior month. The average price reduction was unchanged again at 5%, where it’s been every month since last November. The use of sales incentives beyond price cuts ticked down to 65% from 66%, which was the highest level since May 2020.
• Weekly MBA Mortgage Applications surged +29.7% for the week ending September 13, the biggest increase since January 10. That follows a +9.2% jump the prior week. The Purchase Index was up a modest +2.9% after gaining +6.6% the prior week. The Refinance Index rocketed +57.7% after a +12.2% jump the prior week. That’s the largest jump since March 2020. The average 30-Year Mortgage Rate slipped to 6.39% from 6.49% the prior week, the lowest since October 4.
• Weekly Initial Jobless Claims fell -33,000 to 231,000 for the week ending September 12, better than expectations for 240,0000. The prior week was revised up +1,000 to 264,000. The number of people already collecting unemployment claims (i.e., Continuing Claims) was down -7,000 to 1,920,000 for the week ending September 6 after the prior week’s reading was revised lower by -12,000. That was better than expectations for 1,950,000. 

Asset Class Performance

Source: Bloomberg.
Asset‐class performance is presented by using market returns from an exchange‐traded fund (ETF) proxy that best represents its respective broad asset class. Returns shown are net of fund fees for and do not necessarily represent performance of specific mutual funds and/or exchange-traded funds recommended by The Retirement Planning Group. The performance of those funds may be substantially different from the performance of the broad asset classes and to proxy ETFs represented here. US Bonds (iShares Core US Aggregate Bond ETF); High‐Yield Bond (iShares iBoxx $ High Yield Corporate Bond ETF); Intl Bonds (Vanguard Total International Bond ETF); Large Growth (iShares Russell 1000 Growth ETF); Large Value (iShares Russell 1000 Value ETF); Mid Growth (iShares Russell Mid-Cap Growth ETF); Mid Value (iShares Russell Mid-Cap Value ETF); Small Growth (iShares Russell 2000 Growth ETF); Small Value (iShares Russell 2000 Value ETF); Intl Equity (iShares MSCI EAFE ETF); Emg Markets (iShares MSCI Emerging Markets ETF); and Real Estate (iShares US Real Estate ETF). The return displayed as “Allocation” is a weighted average of the ETF proxies shown as represented by 24% US Bonds, 10% International Bonds, 6% High Yield Bonds, 13.8% Large Growth, 13.8% Large Value, 3.6% Mid Growth, 3.6% Mid Value, 1.2% Small Growth, 1.2% Small Value, 16.8% International Stock, 4.2% Emerging Markets, 1.8% Real Estate.
* The term basis points (bps) refers to a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 0.01%. Bond prices and bond yields are inversely related. As the price of a bond goes up, the yield decreases.