September capped a strong month and quarter for U.S. equities, with major indices advancing and small-cap stocks leading the way. Technology companies remained key drivers of performance, while second-quarter earnings generally exceeded expectations. Forecasts for the third quarter suggest continued—though more moderate—growth. The dollar, which had strengthened over much of the quarter, softened following the Federal Reserve’s (Fed) September decision as markets adjusted to shifting interest rate expectations.
International stocks edged out US stocks in September, but trailed over the quarter. Developed markets delivered solid gains despite lingering political and fiscal uncertainties. Emerging markets led the way over the month and quarter driven by optimism surrounding trade negotiations and growing momentum in China’s AI and technology sectors.
Bonds posted gains in both September and the third quarter as yields declined across much of the yield curve. Short-term rates fell leading up to and following the Fed’s 0.25% rate cut—the first since December 2024. The Fed cited a desire to balance the risks of a softening labor market against persistent inflation, signaling a shift toward a more accommodative stance. Markets quickly priced in the possibility of additional cuts later, fueling strength across Treasuries and investment-grade credit.
Despite near-term uncertainties, 2025 has so far been a great year across major asset classes. US and international stocks have both delivered strong gains, while fixed income has benefited from expectations of additional interest rate cuts. Looking ahead, investor attention will remain focused on upcoming economic data, the path of Federal Reserve policy, and third-quarter corporate earnings season. The recent government shutdown, following Congress’s failure to pass a new spending bill, has added another layer of uncertainty to fiscal and economic forecasts. As we enter the final quarter of the year, the interaction between monetary policy, global growth, and inflation trends will remain key in determining market direction.
Index Performance | September | 3Q | Year to Date | Trailing 12 Months |
US Stocks (Russell 3000) | 3.45% | 8.18% | 14.40% | 17.41% |
International Stocks (FTSE AW ex US) | 3.49% | 7.13% | 26.15% | 16.74% |
US Bond Mkt. (BBgBarc Int. Gov/Cred) | 0.42% | 1.51% | 5.70% | 4.01% |
Cash (ICE BofA ML 3-Mo T-Bill) | 0.33% | 1.08% | 3.17% | 4.38% |