SEPTEMBER CLIENTS NEWSLETTER
Markets Stay Strong and Focused on the Fed Amid More Weak Jobs Data
Despite the release of mixed economic data and ongoing uncertainties, the stock market enjoyed another strong month in August. What’s driving investor optimism, and will it last? No one knows for sure, of course, but we do know that, historically, September and October can be challenging months for the financial markets. Before we look ahead, though, let’s take a closer look at last month.
A wide array of new economic data came out in August, and not all of it was good. According to the Labor Department, only 73,000 jobs were added in July, pushing the unemployment rate up to a four-year high of 4.2%.1 Inflation also trended upward, with the Consumer Price Index’s core inflation rate rising to 2.9%.2 On the plus side, new data showed that consumer spending was strong in July and that personal income levels increased slightly.
Markets Soar
Getting back to the markets, Wall Street easily shrugged off the disappointing economic news (along with a host of ongoing geopolitical uncertainties) and managed once again to hit new record highs. The S&P 500 rose 1.9% in August, an increase that put the market’s broadest index back to a growth rate of 10% for the year. Meanwhile, the Dow Jones Industrial Average jumped by 3.2%, and the Nasdaq rose by 1.58%. The Dow and S&P have now posted four straight months of gains, which is their best streak in about a year, while the Nasdaq has grown for five straight months, its best stretch since early 2024.3
The markets are most likely staying strong despite all the economic yellow flags and global uncertainties for several real reasons. One is that corporate earnings are still mostly solid. Another is that, after wobbling for a while earlier this year, tech stocks have made a strong resurgence and are once again leading the market.
As I noted in last month’s newsletter, the biggest reason for investor optimism is probably that the recent spikes in unemployment and inflation make it likely that the Federal Reserve will soon start lowering short-term interest rates. In fact, the Fed is widely expected to make a rate cut of between 0.25% – 0.50% at its next meeting on September 16. The expectation is so high that the cut has likely already been priced into the market by investors.
With their benchmark short-term rate now at a range of between 4.25% and 4.50%, the Fed has plenty of ammunition to continue cutting rates for a while if necessary to combat the economic slowdown if it worsens. Falling short-term rates typically drive down long-term rates, fueling more spending and borrowing and, ultimately, more economic growth.
Long-term rates have been relatively stable for most of the year, and August was no exception. The interest rate on the 10-year government bond started the month at 4.22% and finished at 4.23%.4
Your Portfolios
As I stated last month, the markets’ strength and resiliency all summer have been great news for investors across the board – especially coming after a big stretch of uncertainty early in the year.
As for our portfolios, we still feel confident we are on pace to meet or exceed our year-end goals for both our fixed-income and dividend-driven equity strategies. For those of you in our most conservative portfolios of bonds and bond-like instruments, that means we’re currently still on track to get you, on average, up to 6% – 6.5% total return for the year.
Of course, even if the Fed starts cutting short-term rates this month as expected, there are certainly never any guarantees when you’re talking about the financial markets. And it’s worth noting that from a historical perspective, neither September nor October are market-friendly months. On average, September has been the worst-performing month for the stock market for nearly a century, while October has seen some of the most infamous market crashes in history.5
Naturally, no one can ever be sure if or when history might repeat itself, but that fact simply underscores why you made the shift to investing for income-first, growth-second in the first place: to better protect your assets and help ensure your income return is steady in all market conditions!
As always, if you have any questions at all about your investments or any other issues, feel free to contact our office at any time!
Sources:
2 https://www.youtube.com/watch?v=mqY0tF8_ceI
3 https://www.cnn.com/2025/08/29/economy/us-stock-market
4 https://www.marketwatch.com/investing/bond/tmubmusd10y?countrycode=bx
5 https://www.investopedia.com/terms/s/september-effect.asp