As we wrap up September 2025, the markets have delivered a pleasant surprise, defying long-standing seasonal patterns that have often made the month of September a challenge for investors. Historically, September has been a headwind for stocks, but this year, we've seen robust gains across major indices. At RetirePath Advisors, we're committed to keeping you informed with actionable insights to navigate your retirement planning. Let's dive into the key highlights from our latest monthly market video and accompanying analysis.
Market Performance: A Strong Finish to Q3
The S&P 500 led the charge, climbing 3.65% in September—marking its best performance for the month in 15 years. This surge contributed to a year-to-date return of close to 15%, showcasing resilience in large-cap stocks. Emerging markets were even more impressive, surging 7.2% as global investors sought growth opportunities beyond developed economies. The MSCI World Index, which tracks equity performance across 23 developed and 24 emerging markets, reflected this broad strength, covering about 85% of the global equity market.
Tech stocks were standout performers, delivering returns exceeding 7.5%, fueled by innovation and AI-driven advancements. Small-cap stocks, as measured by the Russell 2000 Index, also participated in the rally, though more modestly, focusing on the performance of 2,000 smaller companies within the broader Russell 3000. On the fixed-income side, the Bloomberg Aggregate Bond Index provided stability, and outpaced a cash investment.
Source: Morningstar Direct, as of 9/30/2025
Investor Sentiment: Rising Optimism Amid Positive Momentum
This unexpected market strength has significantly lifted investor sentiment, shifting from caution for most of the year (chart) to growing confidence. Indicators like the AAII Investor Sentiment Survey showed bullish responses climbing to 45%, up from prior months, as participants cited the Fed's rate cut and equity rallies as key drivers. Fear & Greed indices hovered in "greed" territory, reflecting reduced volatility and heightened risk appetite. At RetirePath Advisors, we see this as a signal for strategic portfolio adjustments—investors are increasingly optimistic about sustained growth, but we advise balancing enthusiasm with diversification to mitigate potential pullbacks.
Source: American Association of Individual Investors,
9/23/25
Economic Indicators: Fed Actions and Mixed Signals
The Federal Open Market Committee (FOMC) made headlines with a 25-basis-point rate cut (chart), lowering the federal funds target to 4.00%–4.25%. This move, aimed at supporting economic growth, came against a backdrop of rising unemployment at 4.3% (chart) and sluggish job additions of just 22,000 (chart)—well below expectations. Inflation, as tracked by the Consumer Price Index (CPI), ticked up to 2.92%, signaling persistent pressures on everyday costs.
Source: Federal Reserve Economic Data (FRED)
Source: Federal Reserve Economic Data (FRED)
Source: Federal Reserve Economic Data (FRED)
Even with key economic data delayed due to the U.S. government shutdown that started October 1, 2025, expectations for further Fed cuts remain firm (chart). The halt affects releases like nonfarm payrolls and trade deficits, adding uncertainty. Yet, market pricing via tools like the CME FedWatch shows about 98% odds for a 25-basis-point cut at the October 29-30 meeting, with around 90% likelihood for another in December. This dovish outlook, reinforced by the shutdown's economic drag, aims to counter labor market softness and will likely prolong this young bull market (chart).
Source: CME Group
Source: Yardeni Research
Outlook: Opportunities Ahead in Q4
Looking forward, the Fed's dovish stance opens doors for further adjustments, which could favor equities, but longer-term bonds may see yields rise (prices down) which is what occurred in 2024 and has started to occur again here in 2025 (charts).
Source: Federal Reserve Economic Data (FRED)
Source: Federal Reserve Economic Data (FRED)
Additionally, seasonality turns into a potential tailwind in the coming months. Our chart of the day from FactSet illustrates how breaking the September slump could set a positive tone for year-end.
At RetirePath Advisors, we view these developments through the lens of your complete financial landscape. We're not just managing investments; we're advocating for your long-term security. Remember, indices like the S&P 500 and Russell 2000 are benchmarks, not direct investments, and past performance doesn't guarantee future results.
If you're pondering adjustments to your retirement strategy, reach out—we're here to help. Visit retirepathadvisors.com for more resources, or watch the full video for deeper insights. Thank you for your trust; together, we'll build a confident future.
References
- 2025 United States federal government shutdown - Wikipedia - https://en.wikipedia.org/wiki/2025_United_States_federal_government_shutdown
- Government shutdown halts data, stokes risk as economy wobbles ... - https://abcnews.go.com/Business/government-shutdown-halts-data-stokes-risk-economy-wobbles/story?id=126259604
- Shutdown Fed rate cuts - CNBC - https://www.cnbc.com/2025/10/01/lockdown-fed-interest-rates.html
- UBP Weekly View - US shutdown delays labour data - https://www.ubp.com/en/news-insights/newsroom/ubp-weekly-view-us-shutdown-delays-labour-data
- Government shutdown delays key monthly jobs report at a pivotal ... - https://www.nbcnews.com/business/economy/government-shutdown-jobs-report-trump-rcna235298
- BofA Global Research moves Fed rate cut forecast to October from ... - https://www.reuters.com/business/bofa-global-research-moves-fed-rate-cut-forecast-october-december-2025-10-03/
- US Government Shutdown: What's the Impact? | J.P. Morgan - https://www.jpmorgan.com/insights/global-research/current-events/government-shutdown
- The Fed's Next Move on Oct. 29: How a Scenario Few Expect Could ... - https://finance.yahoo.com/news/feds-next-move-oct-29-160924873.html
Index Benchmarks presented within this report may not reflect factors relevant for your portfolio or your unique risks, goals or investment objectives. Past performance of an index is not an indication or guarantee of future results. It is not possible to invest directly in an index.
The S&P 500® Index, or the Standard & Poor's 500® Index, is a market-capitalization-weighted index of the 500 largest U.S. publicly traded companies.
MSCI (Morgan Stanley Capital International) Inc. is an American finance company headquartered in New York City. MSCI is a global provider of equity, fixed income, real estate indices, multi-asset portfolio analysis tools, ESG and climate products. It operates the MSCI World, MSCI All Country World Index and MSCI Emerging Markets Indices among others.
The Russell 2000® Index measures the performance of the 2,000 smaller companies that are included in the Russell 3000® Index, which itself is made up of nearly all U.S. stocks. The Russell 2000® is widely regarded as a bellwether of the U.S. economy because of its focus on smaller companies that focus on the U.S. market.
The Russell 3000 Index is a market-capitalization-weighted equity index maintained by FTSE Russell that provides exposure to the entire U.S. stock market. The index tracks the performance of the 3,000 largest U.S.-traded stocks, which represent about 98% of all U.S.-incorporated equity securities.
The Bloomberg Aggregate Bond® Index broadly tracks the performance of the U.S. investment-grade bond market. The index is composed of investment-grade government and corporate bonds.
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.
The Federal Open Market Committee (FOMC) is the branch of the Federal Reserve System that determines the direction of monetary policy. The FOMC has 12 voting members, including all seven members of the Board of Governors and a rotating group of five Reserve Bank presidents. The Chair of the Board of Governors also serves as Chair of the FOMC.
FRED (Federal Reserve Economic Data) is an online database consisting of hundreds of thousands of economic data time series from scores of national, international, public, and private sources.
The CME FedWatch Tool is a tool created by the CME Group (Chicago Mercantile Exchange Group) to act as a barometer for the market’s expectation of potential changes to the fed funds target rate while assessing potential Fed movements around Federal Open Market Committee (FOMC) meetings.