Weekly Market Update: September 22, 2025

The Federal Reserve lowered the benchmark short-term interest rate by a quarter-point at its September monetary policy meeting. It marked the first action from the Federal Open Market Committee (FOMC) since last December. The central bank also left the door open for additional reductions before year’s end. While policymakers are still watching the pace of inflation, a bigger concern right now for the lead bank is declining job growth. 

The labor market is weakening. This was reflected in several key data points, including minimal job gains this summer. The unemployment rate ticked higher, to 4.3% in August, while the labor force participation rate remains low. This suggests increasing slack in the labor market. It also should be noted that a recent report from the Bureau of Labor Statistics showed that U.S. employers added far fewer jobs than originally thought in 2024 and 2025. For the 12-month period ended March 31st, payroll totals were revised lower by 911,000 jobs. 

The U.S. economy is slowing. The Congressional Budget Office (CBO) is estimating that gross domestic product (GDP) will advance 1.4% this year, which would be half the 2024 rate. The CBO cited reduced immigration—and its impact on the supply of labor—along with tariffs as the primary reasons for its lower GDP forecast. That said, it remains to be seen if the CBO is underestimating the possible positive impact of the new budget bill, which includes tax cuts and regulation rollbacks, on GDP. 

Third-quarter earnings season will be closely watched. It will provide a clearer picture as to whether businesses or consumers are bearing the increased costs due to tariffs. The August retail sales gain of 0.6% was double the expectation, indicating consumers are spending. However, the September Consumer Sentiment Index fell 21%, year over year, with survey respondents showing concern about a weakening labor market and higher prices due to tariff policies. The state of the consumer sector will likely play a huge role in how aggressively the central bank cuts interest rates. 

Conclusion: With the Fed resuming interest-rate cuts, equities may get a boost if the inflation data cooperates. Still, with valuations extended, a portfolio of high-quality stocks and cash-equivalent securities is recommended. 

Source: ValueLine.com