Market Viewpoints
Fall 2025
By Keith Bonjour, CFP®
Senior Vice President, Portfolio Manager
The major stock markets continued their upward momentum in the third quarter, rebounding strongly from a significant pullback earlier in the year. Developed international and emerging market equities have led global performance in 2025, consistently outpacing gains seen in U.S. markets. Meanwhile, the bond market also rallied through the end of the third quarter, with the Bloomberg U.S. Aggregate Bond Index up 6.13% year-to-date.
U.S. trade policy has been volatile throughout the year, but the outlook has stabilized somewhat, as tariff rates remained relatively steady over the past quarter. Second-quarter GDP was revised upward to 3.8%, recovering from a brief dip into negative territory in the first quarter. This growth was primarily fueled by strong consumer spending and a surge in AI-driven business investment, as companies raced to build out new infrastructure.
However, recent data suggests a cooling trend, driven by higher tariffs, elevated inflation, and a softening labor market—all of which are expected to weigh on economic growth for the rest of the year.
In September, the Federal Reserve lowered the federal funds rate by 0.25%, bringing the target range to 4.00%–4.25%. This marked the Fed’s first rate cut of the year, and markets are predicting additional cuts in the coming months.
Combined with the significant tax cuts passed by Congress earlier this year, these policy measures are expected to boost consumer spending in early 2026 and provide a temporary lift to U.S. GDP growth, before momentum slows in the second half of the year.
The Fed has emphasized a data-dependent approach, saying that future interest rate decisions will be made on a meeting-by-meeting basis. However, the current government shutdown has complicated this process by disrupting the release of key economic data.
The Fed has expressed concern about the weakening labor market, with the unemployment rate rising to 4.3% in September. These labor market concerns now seem to outweigh inflation risks in the Fed’s policy considerations, making further rate cuts likely in the months ahead.
As we look toward the remainder of the year, we are still mindful of several risks facing the markets: continued fallout from tariffs, slowing global economic growth, persistent inflation, the ongoing government shutdown, and labor market weakness. We recommend maintaining your long-term investment strategy, keeping in mind that markets move in cycles, and that both stocks and bonds have historically delivered strong returns over longer time horizons.
If you anticipate any short-term cash needs, please reach out to us so we can proactively manage distributions and help protect your portfolio from potential short-term market volatility.
We appreciate the trust you have placed in us and remain committed to making prudent investment decisions as we navigate the evolving market landscape.