Rockport Market Update – September 2025

Key Takeaways

• Inflation ticks up in August – rate cuts still appear likely

• Jobless claims – Re-employment remains the weak link

• GDP final revision 3.3% annualized

Market Review – August 2025

After a slow start, the markets regained momentum and finished August on a strong note. The S&P 500 posted a solid gain of 2.03% for the month, bringing its year-to-date return to an impressive 10.79%. It’s been a remarkable rebound since the lows seen in early April.

What’s particularly encouraging is the broad participation in this rally. The Dow Jones Industrial Average, Nasdaq, S&P 500 Equal Weight Index, and even the bond market all delivered positive returns in August. This kind of across-the-board strength is often a sign of a healthy market breadth, suggesting the recovery isn’t being driven by just a handful of names.

Inflation Update: A Subtle But Notable Climb

Inflation, as measured by the Consumer Price Index (CPI), hit its low for the year in April at 2.31%. Since then, we’ve seen a steady— though not dramatic— rise, with August’s reading coming in at 2.70%.¹

Why does this matter? While moderate inflation is typically viewed as a sign of a growing economy, persistently rising inflation can have negative implications. It erodes consumer purchasing power, raises costs for businesses, and can pressure corporate profit margins. For a quick reminder of the potential impact, we only need to look back to 2022, when CPI surged above 9% and equity markets struggled in response.

To be clear, we are not anticipating a return to those extremes. However, current trends suggest inflation could continue to rise modestly through the end of the year. Adding complexity to the outlook, the Federal Reserve appears to be preparing for interest rate cuts as early as September. While rate cuts can support economic growth and markets in the short term, they may also contribute to further inflationary pressure.

This evolving environment underscores the importance of staying vigilant and thoughtful when making investment decisions. Asset allocation strategies may need to adapt as both inflation and interest rate expectations shift heading into year-end.

Federal Reserve: Rate Cuts on the Horizon?

Despite continued economic growth, the Federal Reserve appears to be positioning for potential interest rate cuts as early as September. Market expectations currently reflect an 88% probability of a cut in September, and a 73% chance of additional easing in October.²

While the strength of the U.S. economy could support the case for holding rates steady, the Fed’s dual mandate— managing inflation and supporting employment— means that recent signs of labor market softening may provide the justification it needs to begin cutting.

Of course, the extent and pace of any rate reductions remain uncertain. Whether we see a modest adjustment or a more significant easing cycle will depend on how inflation and employment data evolve in the months ahead. Either way, potential policy shifts could introduce new dynamics into the economic and market landscape as we move toward year-end.

Source: CME FedWatch Tool – CME Group

Labor Market: Slowing, But Not Stalling

The job market remains a key area to watch as we move into the final quarter of the year. While it’s not showing signs of a sharp downturn, there are clear indications of softening. Continuing jobless claims have been trending higher (albeit gradually) and are now at their highest levels since November 2021.

One concerning trend is that re-employment is becoming more difficult. Workers who lose their jobs are taking longer to find new positions, suggesting a cooling in overall labor demand.

From a policy perspective, this data gives the Federal Reserve some additional justification to begin easing interest rates. A softer job market, coupled with moderating inflation, increases the likelihood that the Fed will shift toward a more accommodative stance in the coming months.

GDP Revised Higher: A Sign of Steady Growth

The final reading for second-quarter GDP was revised slightly upward, from 3.0% to 3.3%. While not a dramatic change, this revision reinforces the view that the U.S. economy continues to grow at a healthy pace.

Economic growth is one of the key pillars supporting stock market performance over the intermediate and long term. A stable or improving GDP typically signals strong consumer and business activity— both of which are positive for corporate earnings and investor confidence.

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Information as of 9.9.25

Securities offered by Registered Representatives through Private Client Services, Member FINRA/SIPC. Advisory products and services offered by Investment Advisory Representatives through Rockport Wealth LLC, a Registered Investment Advisor. Private Client Services and Rockport Wealth LLC are unaffiliated entities.  The opinions contained herein are that of the authors not necessarily that of Private Client Services LLC and there should not be any guarantees assumed from the information presented.

Investments in securities do not offer a fixed rate of return. Principal yield and/or share price will fluctuate with changes in market conditions, and when sold or rendered, you may receive more or less than originally invested. No system of financial planning strategy can guarantee future results. Investors cannot directly invest in indices. Past performance does not guarantee future results. The performance numbers we mention are indexes. If you’re a client, we manage a custom portfolio for your particular situation and the performance will be different. You cannot invest directly in an index. Investing in an index fund involves fees and will reduce your overall return compared to the index.

1 Charts produced at yCharts.com

2 CME FedWatch Tool – CME Group

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