September in Review

Summary

• The U.S. economy grew at a 2.2% annualized rate in the second quarter, revised up from a prior 1.5% estimate due to stronger consumer spending.
• Inflation remained above target but cooled more than expected in August, with the personal consumption expenditures price index rising 0.3%.
• The labor market reaccelerated as payroll growth exceeded expectations while the unemployment rate held steady at 4.1%.
• Consumer spending remained strong with retail sales rising 1.2% in August, marking the largest monthly gain in nearly two years.
• The S&P 500 finished September with a return of -0.35% but held a year-to-date gain of about 12% driven by large technology companies.
• Semiconductor stocks rose 9.6% late in the month as strong demand for data center infrastructure supported artificial intelligence enthusiasm.
• Interest rate-sensitive sectors including homebuilders and consumer-oriented companies faced pressure from higher long-term interest rates and rising energy costs.
• Smaller companies and large value companies underperformed relative to other market segments.
• S&P 500 third quarter earnings are expected to grow 29.1% with the index trading at 19.0 times forward price-to-earnings.
• Developed international markets moved lower overall while Japanese equities managed modest gains despite global interest rate pressures.
• Emerging markets remained supported by AI-related demand with North Asian semiconductor companies leading performance.
• Treasury yields rose sharply across the curve with the two-year rate increasing 54 basis points to 4.89% and the 10-year rate rising 53 basis points to 5.28%.
• The Federal Reserve raised the federal funds target 25 basis points to a range of 3.75% to 4.00% at its September meeting, its first increase since 2023.
• Policymakers raised their long-term rate projections and now expect inflation to take longer to return to target.
• Fed Chair Kevin Warsh emphasized the Committee's commitment to restoring price stability despite firm economic growth and labor market conditions.
• Markets are pricing roughly a 37% chance of another rate hike in October.
• Investment-grade corporate and high-yield spreads remained relatively flat while the Bloomberg U.S. Aggregate Index fell 2.6% and the Bloomberg U.S. Corporate High Yield Index fell 2.5%.
• West Texas Intermediate crude finished the month up 5.4% at $90.42 per barrel after volatility driven by Middle East geopolitical tensions.
• Gold ended the month at $4,157.41 per ounce, down 6.3% but remaining resilient despite higher interest rates and bond yields.
• The U.S. dollar rose 2.0% against a basket of currencies supported by higher interest yields and Treasury yields.
• The Bloomberg U.S. 3000 Index returned -0.80% month-to-date with a 12.63% year-to-date return.
• The S&P 500 returned -0.35% month-to-date with a 12.75% year-to-date return.
• The Bloomberg U.S. 1000 Small Cap Index returned -4.47% month-to-date with a 13.43% year-to-date return.
• The Bloomberg Magnificent 7 Index returned 4.22% month-to-date with a 9.17% year-to-date return.
• The MSCI Japan index returned 1.48% month-to-date with a 22.67% year-to-date return.
• The MSCI Emerging Markets index returned -0.56% month-to-date with a 23.38% year-to-date return.
• The Bloomberg U.S. Aggregate Index returned -2.61% month-to-date with a -2.91% year-to-date return.
• The Bloomberg Corporate High Yield Index returned -2.52% month-to-date with a 0.10% year-to-date return.
• The Bloomberg Commodity Index returned 0.61% month-to-date with a 32.87% year-to-date return.
• The Wilshire U.S. Real Estate Securities Index returned -6.31% month-to-date with a 5.48% year-to-date return.