September 22, 2025

“Know what you own and why you own it “
Peter Lynch

Welcome to this week’s edition of our Market Insights, and what a week as we enter the last week of the Third Quarter. As last week wrapped up, global markets showed mixed but generally positive momentum amid ongoing economic signals from central banks and sector-specific developments. Though managed zero returns unlike the US Markets.

But first here are the numbers. S&P 500: The broad-market benchmark advanced +1.91%, hitting another all-time high. Large-cap tech stocks were a key driver, benefiting from robust earnings reports and improved investor confidence in the sector’s recovery. Dow Jones Industrial Average led U.S. indices with a solid gain of +3.20%. This surge was fueled by positive sentiment in industrial and blue-chip stocks, pushing the index toward new highs amid economic optimism. Tech-heavy Nasdaq rose +1.58%, supported by gains in semiconductors and software companies. While not as strong as the Dow, it reflected continued strength in innovation-driven sectors. Internationally, the stogy FTSE 100 was off .72% contributing to the over malaise of European stocks. The large cap MSCI-EAFE was Flat 0%. The 2-year Treasury paid 3.58% and the 10- year yield was 4.13%.

So, what happened? Last week, major U.S. indices posted gains, as previously mentioned, driven by strong earnings in large-cap tech and a broader recovery in valuations. International non-European, markets also performed well, with non-U.S. developed equities leading the way. Overall, all major markets finished the week in positive territory, with those international equities shining brightest. This reflects a global risk-on environment, though volatility remains a watchpoint in choppy conditions. MSCI EAFE (Europe, Australasia, Far East): This index, representing developed markets outside North America, outperformed with non-U.S. developed equities leading global returns. The rest of Europe ex-USA posted approximately +7.1%, driven by strong performances in emerging and developed international stocks. Emerging markets also contributed positively, adding to the overall upbeat international picture.

And the much-anticipated Federal Reserve meeting? It sure seems like every Fed meeting is the most anticipated meeting since the last meeting. The one on Wednesday was no exception. I saw a lot of pundits use the word ‘pivotal’, but it really wasn’t. It was weird, though. Usually, going into a meeting, we know at a minimum who is going to be voting. Not so much this time. As John Authers noted in his column for Bloomberg on Tuesday: “Seven Federal Reserve governors have a vote on interest rates, along with five of the eight regional bank presidents, who serve in rotation. Late last Monday, the Senate rushed to confirm Stephen Miran’s appointment to fill a vacancy, so he will take part. Meanwhile, the administration tried to persuade an appeals court that it could fire Lisa Cook, a governor whose term has more than a decade to run, in time to prevent her from voting. On Monday night, the court ruled that she could vote. There was never any chance to replace her before the meeting, but the administration evidently cares passionately about each vote.”

Certainly, the outcome of the meeting wasn’t in doubt regardless of who sat at the table. Various Fed talking heads had been signaling for a while that they were inclined to lower rates, and lower rates they did. By a quarter point. Relevant News Highlights Federal Reserve Updates are The Federal Reserve continues to be a focal point for investors. As of early September 2025, markets have increasingly priced in a potential rate cut for the month, contributing to the week’s positive equity performance. Front-end rates declined in anticipation, signaling expectations of looser monetary policy to support economic growth. No major announcements were made last week, but ongoing Fed communications suggest a data-dependent approach, with inflation and employment data under close scrutiny. Other key points that emerged on Wednesday. Median projection indicates two more quarter-point rate cuts this year. Six Fed officials see no more rate cuts in 2025. One actually thought rates should be increased. Nine Fed officials see two additional rate cuts in 2025. There was only one dissenter among the FOMC’s voting members. That happened to be Stephen Miran, who wanted a 50bps cut. Miran also stands out because he thinks the Fed should cut rates to below 3% before the end of the year. This is clearly visible below. But the Fed is really struggling with two competing forces. On the one hand, the job market is softening, or at least it looks like it is. Payroll growth is proving to be more sluggish than originally thought. There are now more people looking for work than open positions. Unemployment among younger people is ticking noticeably higher. The immigration situation is making any analysis doubly difficult.  But on the other hand, inflation is clearly percolating above the Fed’s target, and risk assets are in high demand. Investors are eyeing the next FOMC meeting for clearer guidance on the rate path.

And the Bond Market reaction? The bond market exhibited mixed dynamics last week. Front-end yields (e.g., 2-year Treasuries) declined as markets factored in the aforementioned Fed cut expectations, providing some relief to short-term borrowing costs. However, longer-term rates remained elevated, reflecting concerns over persistent inflation or economic resilience. The Bloomberg Corporate Bond Index showed an average yield-to-worst of nearly 5% as of late June 2025, indicating attractive opportunities for fixed-income investors in a higher-rate environment. Overall, bonds provided a stabilizing force amid equity gains, with corporate bonds holding up well in choppy markets.

How about Housing and Mortgage rates? Any good news? Housing and mortgage rate news was relatively subdued last week, with no major shifts reported in the immediate data. However, broader trends from recent months (e.g., as of September 9, 2025) indicate that mortgage rates have been influenced by the bond market’s movements. With front-end rates easing due to Fed cut expectations, 30-year fixed mortgage rates hovered around historical averages, potentially dipping slightly to encourage homebuying activity. The housing market remains resilient but sensitive to interest rate changes—watch for updates from the National Association of Realtors or Freddie Mac for the latest figures. Affordability challenges persist in high-demand areas, though lower rates could provide a boost.

This week underscored a resilient global market landscape, with U.S. indices buoyed by tech strength and international markets leading the way. So far, we are on track for a third straight year of positive returns for the US Markets. Hopefully, we can pop a cork come January 1, 2026. As we head into the final quarter of 2025, keep an eye on Fed decisions, bond yield fluctuations, and housing data, which could shape investor sentiment, More in the quarterly report to all our clients the first week of October.

Mike