At its September meeting, the Federal Reserve cut rates by 25 basis points, prioritizing signs of a weakening labor market over the recent uptick in inflation. The unemployment rate climbed to 4.3%, with continuing jobless claims remaining elevated. Meanwhile, both the Consumer Price Index (CPI) and the Fed’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) index, rose to 2.9% year-over-year in August as the impact of tariffs continued to filter through the data.
Markets are now fully pricing in another 25bps rate cut in October, with an 89% probability assigned to a larger 50-basis-point cut in December. Retail sales were up a strong 4.8% year-over-year helping support a 3.8% revised GDP growth rate for the second quarter. Despite the strong spending, consumer sentiment continued to deteriorate, falling to 55 in September, a level below 99% of historical readings since 1952.
The quarter concluded with the federal government entering a shutdown, delaying the release of non-farm payroll data ahead of the next Federal Reserve meeting.
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The Nasdaq Composite continued to climb posting the best performance among major indexes for the second quarter in a row, gaining 11.4% followed by the S&P500’S 8.1% return and the Dow Jones Industrial Average’s 5.7% increase. Ten out of the eleven sectors in the S&P500 posted positive returns for the quarter. Information Technology and Telecommunications led the market for the second quarter in a row with returns of 13.2% and 12.0%, respectively. Consumer Staples was the worst performer, declining 2.4% in the period.
Small-caps continued to lead in the third quarter, climbing 12.4% and outperforming both large-cap and mid-cap returns. The Russell 2000 gained 12.4%, while the Russell 1000 gained 8.0%, and the Mid-Cap Index posted returns of 5.3%. Growth maintained its lead, materially outperforming value, with the Russell 1000 Growth Index rising 10.5% while the Russell 1000 Value Index returned 5.3%.
Bonds were positive but underperformed all equity indexes. US Corporates provided positive returns in the quarter with the Bloomberg Aggregate returning 2.0% while Long-dated US Treasures inched ahead, gaining 2.4% in the quarter.
The US Dollar was flat in the quarter but still down 9.9% year-to-date while Gold continued its meteoric climb higher, gaining 15.2% in the quarter and up 42.6% year-to-date. West Texas Intermediate (WTI) crude fell -4.2% in the quarter bringing its year-to-date return to -13.0%. Bitcoin moved marginally higher, gaining 6.5% and reaching an all-time high in August at $123.0k and ended the quarter at $114.6k.
Data sourced by Bloomberg. Index data as of 9/30/25.
The S&P 500 Index is a market capitalization-weighted index of 500 widely held common stocks. Investors cannot invest directly in an index and unmanaged index returns do not reflect any fees, expenses or sales charges. The Dow Jones Industrial Average (DJIA) is an unmanaged index composed of 30 blue-chip stocks, each with annual sales exceeding $7 billion. The DJIA is price-weighted, reflects large-cap companies representative of U.S. industry, and historically has moved in tandem with other major market indexes, such as the S&P 500. The NASDAQ Composite Index is a market capitalization-weighted index that is designed to represent the performance of NASDAQ securities and it includes over 3,000 stocks. The Russell® 2000 Index is a small-cap stock market index that makes up the smallest 2,000 stocks in the Russell 3000 Index. The Russell Midcap® Index, an unmanaged index, measures the performance of the 800 smallest companies in the Russell 1000 Index. The Russell 1000® Index measures the performance of the 1,000 largest companies in the Russell 3000 Index, which represents approximately 92% of the total market capitalization of the Russell 3000 Index. The Russell 1000 Growth® Index measures the performance of those Russell 1000 Index companies with higher price-to-book ratios and higher forecasted growth values. The Russell 1000 Value® Index measures the performance of those Russell 1000 Index companies with lower price-to-book ratios and lower forecasted growth values. The Bloomberg US Treasury: 20+ Year Index measures US dollar-denominated, fixed-rate, nominal debt issued by the US Treasury with 20+ years to maturity. The Bloomberg USAgg Index is a broad-based flagship benchmark that measures the investment grade, US dollar- denominated, fixed-rate taxable bond market. The index includes Treasuries, government-related and corporate securities, MBS (agency fixed-rate pass-throughs), ABS and CMBS (agency and non-agency). West Texas Intermediate (WTI) Crude Oil is the underlying commodity of the New York Mercantile Exchange's oil futures contract and serves as one of the main global oil benchmarks. CPI: Consumer Price Index measures the monthly change in prices paid by U.S. consumers. PCE: Personal consumption expenditures includes a measure of consumer spending on goods and services among households in the US. PCE, CPI, and inflation rates based on available data at the time the piece was written and are not guaranteed to stay the same in the future.
The views expressed in this commentary reflect those of Patient Capital Management analyst(s) as of the date of the commentary. Any views are subject to change at any time based on market or other conditions, and Patient Capital Management disclaims any responsibility to update such views. The information presented should not be considered a recommendation to purchase or sell any security and should not be relied upon as investment advice. It should not be assumed that any purchase or sale decisions will be profitable or will equal the performance of any security mentioned. Past performance is no guarantee of future results.
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