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Week in Review
Equity Markets:
Record highs were achieved by the broader stock markets last week. For the week, the Dow Jones Industrial Average gained 1.10%, the S&P 500 gained 1.25%, and the Nasdaq gained 2.22%, all of which led to all-time highs for Large Cap stocks this past Friday.[1] The Russell 2000 Index, which oversees Small Cap stocks, hit an all-time high on Thursday, its first since November 2021; it was up 2.19% for the week.[2]
The Federal Reserve’s Open Market Committee cut interest rates by 25 basis points on Wednesday, which helped spur positive equity market performance. Meanwhile, the Forward P/E Ratio for the S&P 500 ticked up to 22.6, which is exceptionally elevated and indicative of rather high valuations.[3]
Fixed Income Markets:
Treasurys recognized their first weekly decline since mid-August.[4] When the Federal Reserve cut interest rates, the yield curve steepened, increasing by term of the bond at hand. And while Treasurys with a term of one year or less saw their yields decline, all other Treasurys saw theirs raise. Yields for the 10-Year Treasury rose 6 basis points to 4.13%.[5]
High Yield Corporates rallied in value by 0.34% for the week; declines were seen in Investment Grade Corporates (-0.13%) and Emerging Markets (-0.34%). Municipals were largely flat.
Economic:
The Overnight Bank Funding Rate, a.k.a. US interest rates, has now been pulled back to 4.00%-4.25%.[6] Regarding their actions, the Federal Open Market Committee noted their obligation to further maximum employment to justify this round of cuts, and their updated summary of economic projections indicated risks to employment with minimal growth to real GDP. Updates to the FOMC’s ‘dot plot’ indicate two more interest rate cuts this year.
Last week also saw the US negotiating with China in Madrid over economic concerns. This diplomacy was concluded with a phone call between President Donald Trump and Chinese President Xi Jinping on Friday. Actual deals were minimal, but some headway was reached.[7]
Looking Ahead
Equity Markets:
Last week’s interest rate cut was our first in the past nine months, and it furthered the markets’ upward growth. Our resilient bull market has multiple foundations: new investments in advanced technologies, robust forward earnings expectations, and our pro-business government, including an accommodative Federal Reserve.[8]
Such robust equity growth cannot last forever, and investors should make sure that their current allocations match their long-term objectives. At the same time, and as the old wisdom goes, make hay while the sun shines.
Fixed Income Market:
The steepening of the yield curve is perhaps a new headwind to bonds. We are likely to see a continued steepening until we begin to see either inflation beginning to turn lower, or better control of public sector deficits. Ideally, we’d see both.
Those investors seeking income may consider this an opportune environment to purchase fixed income investments, noting the current disposition of yields; as well, we may see them become more attractive as risk premiums may widen in time. This recognizes current risks to debenture income, including how tariffs may reasonably lead to further constriction of consumption by both individuals and businesses. Contemporaneous geopolitical uncertainties also present new risks to future fixed asset investments.
Economic:
Personal Consumption Expenditures will be announced at the end of the week. Core PCE is the metric the Federal Reserve most relies upon to gauge inflation. Last month saw Core PCE read at an annual rate of 2.9%.[9] With this reading, we will see whether price inflation has continued to expand; or, if it has eased and is now more in control.
Sources:
1) JP Morgan Asset Management
2) John Hancock Investment Management, LLC
https://www.jhinvestments.com/weekly-market-recap#fund-industry-overview
3) FactSet Research, Inc.
4) LPL Financial
https://www.lpl.com/research/blog/weekly-market-performance-september-19-2025.html
5) Nuveen, LLC
6) Federal Reserve Bank of New York
https://www.newyorkfed.org/markets/reference-rates/obfr
7) T. Rowe Price Investment Services, Inc.
https://www.troweprice.com/personal-investing/resources/insights/global-markets-weekly-update.html
8) Charles Schwab Corporation
https://www.schwab.com/learn/story/stock-market-update-open
9) Bureau of Economic Analysis
https://www.bea.gov/news/2025/personal-income-and-outlays-july-2025
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Diversification does not eliminate the risk of market loss. Investments involve risk and unless otherwise stated, are not guaranteed. Investors should understand the risks involved of owning investments, including interest rate risk, credit risk and market risk. Investment risks include loss of principal and fluctuating value. There is no guarantee an investing strategy will be successful. Past performance is not a guarantee of future results. Indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio. The S&P data is provided by Standard & Poor’s Index Services Group.
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