Taking Stock: Executive Summary September 30, 2025

Q3 In Review:

It was another strong quarter for U.S. equities, with the major indices hitting record highs. In spite of mixed economic data, a softening job market and a looming government shutdown, the DOW, NASDAQ, S&P 500 and Russell 2000 ended the quarter up 5.2%, 11.2%, 7.8% and 12% respectively. And while many anticipated that by now the U.S. would be teetering on the brink of a recession, the economic picture remains fairly rosy. Whether the market is keeping the economy out of a recession or the economy is keeping the market from correcting is hard to know, but both the economy and the markets have proven incredibly resilient over the quarter … in fact, over the past several years. 

After exiting a volatile second quarter, we began Q3 with a plethora of variables potentially creating headwinds for the markets ... tariff uncertainty, labor-market concerns, inflationary pressure and continued geopolitical tension to name a few. And we expected, at the very least, a volatile quarter. But Q3 surprised us with relatively smooth sailing and continued growth … a nice change from 2025’s volatile first half. And barring unforeseen circumstances, we expect markets to continue to push higher through year-end. (No crystal ball here; however, historically speaking, continued growth is likely.)

Inflation, while not yet at the Fed’s 2% goal, has decreased significantly since the post-pandemic escalation, and with a nod towards the job market needing a shot in the arm, the Fed cut interest rates by 25 basis points. “Unemployment is still low but we’re seeing downside risks,” Fed chairman Jerome Powell said at a September news conference. With the government shutdown that began October 1, 2025, extending for who-knows-how-long, it may not be the last rate cut in 2025. 

Shut down?  What shut down?  Even that didn’t dampen market enthusiasm as investors gave it little more than a shrug. Continued economic expansion and increased productivity and earnings growth continued to fuel the market’s momentum – even through September, historically the weakest month of the year.

Recent Economic Data:

Gross Domestic Product (GDP). The GDPNow model estimate for real GDP growth in Q3 2025 is 3.8% (seasonally adjusted annual rate as of October 1, 2025), unchanged from Q2 estimate (released September 25, 2025). The U.S. economy continued its expansion, with strong consumer spending considered a major factor. (A growth rate between 2% and 3% is commonly considered “normal.”)  

Unemployment. Due to the Federal government’s shutdown, the U.S. Bureau of Labor Statistics (BLS) has not released September unemployment data. The Chicago Fed report, which combines private and available public data, estimates the September Jobless rate was 4.3%, unchanged from BLS’s August report. However, despite economic growth, labor market concerns continue.  Private payrolls, according to a recent report from payroll processor, ADP, saw their biggest decline in 2 ½ years.  

Consumer Confidence. The Conference Board Consumer Confidence Index, an indication of consumer attitudes and buying intentions, decreased 3.6 points in September to 94.2, based on concerns over the economy and labor market. (1985 benchmark: 100) 

Consumer Price Index (CPI). The CPI for All Urban Consumers (CPI-U), a measure of inflation which shows “cost of living” fluctuations, increased 0.4 % in August on a seasonally adjusted basis. Over the last 12 months, the all-items index increased 2.9% before seasonal adjustments. 

Earnings. For Q2, the estimated (year-over-year) earnings growth rate for the S&P 500 is 7.9%.  If this is the actual growth for the quarter, it will mark the ninth consecutive quarter of earnings growth for the index.  

Housing. Private housing starts in August showed a 6% decrease from August 2024.  Despite the Fed’s interest rate cut, mortgage rates remain elevated, and home values are still high, causing some buyers to stay on the sideline. Builder Confidence in the market for newly built single-family homes was 32 in September, according to the NAHB/Wells Fargo Housing Market Index released September 16, 2025.  (Less than 50 is an indication that most builders do not feel confident about the near-term housing market outlook.) 

Looking Ahead:

With markets at all-time highs, people begin to wonder “when does the bubble pop?” There are  hints of recession, and stock valuations are considered high -- it seems like under normal circumstances we would see an economic and/or market correction.  But then again, there seems to be a new normal. And while markets and the economy are not impervious to challenges they may be facing, daunting as they are (rising valuations, elevated inflation, a weakening labor market, the US fiscal deficit and trade policy, etc., etc., etc.), we believe it’s more likely that opposing positive factors will shore up the floor leading to continued growth.

And so we enter the fourth quarter balancing optimism with caution (cautiously optimistic as the phrase goes), understanding that change and variables abound and reiterating what we have said time and time again. Ignore the noise and continue your path. Maintain a portfolio tailored to your goals, needs, risk tolerance, and time horizon, mitigating downside risk by concentrating on fundamentals and investing in quality companies in a diversified portfolio. Stay the course.  

“Stay focused on your mission, remain steadfast in your pursuit of excellence, and always do the right thing.”  

                                                                                          Mark Esper, Former US Secretary of Defense

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Executive Summary Sources:

https://www.nasdaq.com/articles/september-third-quarter-2025-review-and-outlook

https://www.lpl.com/research/blog/what-can-year-to-date-gains-tell-us-about-the-fourth-quarter.html#:~:text=New%20Records%20Support%20a%20Solid,full%20year%20in%20the%20red.

https://www.federalreserve.gov/newsevents/speech/powell20250923a.htm

https://www.cbsnews.com/news/2025-government-shutdown-stock-market/

https://www.morningstar.com/news/marketwatch/2025090155/september-is-historically-the-worst-month-of-the-year-for-stocks-why-this-time-could-be-different

https://www.atlantafed.org/cqer/research/gdpnow

https://www.bea.gov/news/2025/gross-domestic-product-2nd-quarter-2025-third-estimate-gdp-industry-corporate-profits

https://www.chicagofed.org/research/data/chicago-fed-labor-market-indicators/latest-release

https://finance.yahoo.com/news/adp-reports-biggest-private-payroll-133411671.html

https://www.bls.gov/news.release/pdf/empsit.pdf

https://www.conference-board.org/topics/consumer-confidence/

https://www.bls.gov/news.release/pdf/cpi.pdf

https://advantage.factset.com/hubfs/Website/Resources%20Section/Research%20Desk/Earnings%20Insight/EarningsInsight_092625A.pdf

https://www.census.gov/construction/nrc/pdf/newresconst.pdf

https://www.nahb.org/news-and-economics/press-releases/2025/09/builder-confidence-steady-but-future-sales-expectations-hit-six-month-high

https://www.cnbc.com/2025/09/25/federal-reserve-chair-jerome-powell-warns-stocks-are-fairly-highly-valued.html

https://www.morningstar.com/indexes/dji/!dji/performance

https://www.morningstar.com/indexes/xnas/@cco/performance

https://www.morningstar.com/indexes/spi/spx/performance

https://finance.yahoo.com/quote/%5EDJI/history?p=%5EDJI

https://finance.yahoo.com/quote/%5EIXIC/history?p=%5EIXIC

https://finance.yahoo.com/quote/%5EGSPC/history?p=%5EGSPC

Past performance is not indicative of future results.

The views expressed represent the opinion of Asset Management Financial Solutions, Inc. (“AMFS”) and are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and AMFS’s view as of the time of these statements.  Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties.