Weekly Market Sparks: September 22, 2025

Rusty Vanneman

— 2 min read

Talking Points for the Week That Was and the Week Ahead

Executive Summary Sparks

  • Last Week: Major U.S. stock indexes hit fresh record highs after the Federal Reserve cut interest rates for the first time since 2024. Earnings optimism helped fuel gains, with small caps finally breaking out to new all-time highs.
  • The Week Ahead: Investors will be watching final Q2 GDP, durable goods orders, and the Fed’s preferred inflation gauge (Core PCE).
  • Market Wisdom: “Diversification is the only free lunch in investing.” When markets reach new highs in valuations, discipline and diversification matter more than ever.

Sparks from the Week That Was

  • Market Performance:
    The S&P 500 climbed +1.2% last week, while the Nasdaq gained +2.2%. The Russell 2000 surged +2.0%, finally clearing its 2021 record high which is proof that even long-forgotten segments can lead again.
  • Federal Reserve & Policy:
    The Fed cut rates by 25 basis points, citing labor market softness. Projections now suggest two more cuts this year, with Chair Powell framing the move as “risk management.” Historically, when the Fed cuts with markets near highs, forward returns have been strong as J.P. Morgan notes the S&P 500 has been positive every single time one year later.
  • Economic Data:
    August retail sales rose +0.6%, well above expectations, underscoring resilient consumer demand. The Atlanta Fed’s GDP tracker points to +3.3% Q3 growth. Housing, however, was weak—starts fell to the lowest pace since mid-2024, though lower mortgage rates are driving a surge in refinancing activity.
  • Bond & Credit Markets:
    Treasury yields rose on the long end, with the 10-year closing near 4.3%. Powell’s cautious tone kept upward pressure on rates, even as short-term yields steadied post-cut. Credit spreads remain tight, reflecting continued market confidence.
  • Sector & Style Sparks:
    Technology remained a key driver, but last week’s breakout in small caps suggested breadth could be improving. Strong earnings expectations remain an important support for the rally.
  • Other Noteworthy Sparks:
    Trade news made headlines with President Trump and President Xi signaling progress on U.S. ownership of TikTok and broader trade talks. Importantly, tariff risks still hang in the background.

Sparks for the Week Ahead

  • Economic Data:
    Watch for new home sales (Wed), Q2 GDP final reading (Thurs), durable goods orders (Thurs), and Core PCE inflation (Fri). Any softening in inflation alongside solid growth would reinforce the Fed’s easing path.
  • Fed & Policy:
    Markets are pricing in an 80–90% chance of two more cuts this year. Fed commentary will continue to drive bond yields and sector leadership.
  • Markets & Earnings:
    While macro headlines are grabbing attention, keep an eye on earnings revisions which have been a key driver behind this year’s gains. Broad participation from small caps, value, and cyclicals would provide healthier footing for the rally.

Sparks of Market Wisdom

At moments like these—record highs, optimism around Fed cuts, and strong earnings expectations—it’s tempting to chase performance. But markets are already richly valued, and risks remain: narrow breadth, tariff uncertainty, and an economy sending mixed signals. The antidote is timeless: stay invested, stay diversified, and stay disciplined.

Quote of the Week

“Diversification is the only free lunch in investing.” — Modern Portfolio Theory (MPT) shows that spreading investments across distinct assets with low or negative correlations reduce overall portfolio volatility without sacrificing returns.

Invest Well, Be Well.
Rusty Vanneman | rustysbridge.com
Listen to my latest podcast: Invest Well, Be Well

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