As we enter the fourth quarter of 2025, we’d like to share our latest market observations as of early September. Equity markets have generally performed well this year, supported by resilient corporate earnings and steady consumer demand. We see the beginnings of what could be labor market softening and understand that can create uncertainty, particularly around the Federal Reserve’s next moves on interest rates. Despite this, the broader economy continues to show strength, offering cautious optimism as we navigate the months ahead. 

Labor Market Trends

  • The September jobs report seems to be signaling a weakening in the labor market for the first time in a while.
  • Job openings to unemployed ratio has dropped to 1, indicating equilibrium but trending downward.
  • Unemployment rate has ticked up to 4.3%, highest since 2021, though still historically low.
  • Labor market softening complicates the Federal Reserve’s policy decisions.

Inflation and CPI

  • Inflation has improved from peak levels (~9%) but remains above the Fed’s mandated target:
    • CPI: 2.7% in July, rose to 2.9% in August
    • Core CPI: 3.1%., less volatile food and energy prices
  • Inflation is not cooperating, adding pressure on economic policy.

Interest Rates and Yield Curve

  • Yield curve shows short-term rates falling (due to expected Fed cuts), but long-term rates remain high.
  • Market expects three Fed rate cuts by year-end: September, October, and December.
  • Long-term rates reflect concerns about fiscal policy and persistent inflation.

Asset Class Performance

  • Equities and fixed income show low correlation, aiding diversification.
  • U.S. Dollar is on a downward trend, supporting international assets.
  • Gold has surged as investors diversify away from the dollar.

Volatility Landscape

  • Equity volatility is below historical averages.
  • Interest rate, currency, and commodity volatility are elevated but trending lower.
  • Overall, cross-asset volatility is declining, influencing portfolio allocation.

Market Observations as of 9/10/2025, subject to change and not to be used or interpreted, as a recommendation.

IMPORTANT INFORMATION

Definitions:

The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. Indexes are available for the U.S. and various geographic areas.

A basis point (BPS) is a unit of measure used to indicate percentage changes in financial instruments. Basis points are typically expressed with the abbreviations "bp," "bps," or "bips." One basis point is equal to 1/100th of 1%, or 0.01%. In decimal form, one basis point appears as 0.0001 (0.01/100).

Information provided in this newsletter is general in nature, is provided for informational purposes only and should not be construed as investment advice. The views and opinions expressed are those of the authors) as of the stated date of their contribution and any such views and opinions are subject to change at any time based on market, or other conditions, and are not intended to be a forecast of future events, a guarantee of future results or investment advice. Securities and sectors referenced should not be construed as a solicitation or recommendation or be used as the sole basis for any investment decision.

All investments contain risk and may lose value. Statements concerning financial market trends or portfolio strategies are based on current market conditions, which will fluctuate. There is no guarantee that these investment strategies will work under all market conditions or are appropriate for all investors and each investor should evaluate their ability to invest for the long term, especially during periods of downturn in the market. Outlook and strategies are subject to change without notice.

Past performance is not a guarantee of future results. Portfolio rebalancing and diversification do not guarantee a profit or protection against loss in a declining market.

No guarantee or representation is made that investment objectives and/or opinions stated will be achieved. The experience of each specific client or investor may vary.

Due to the subjective aspect of these analyses, the effective evolution of the economic variables and values of the financial markets could be significantly different from the projections, forecasts, anticipations and hypotheses, which are communicated in this material.

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GE-8395220.1 (09/2025) (Exp. 09/2029)