Markets Rebound to End the Week

September 29, 2025

Financial Markets

After spending most of the week in decline, U.S. equity markets regained ground on Friday, finishing the session on a positive note. While the late rebound did not erase earlier losses, it provided some relief to investors.

The recovery came despite lingering concerns that continue to weigh on sentiment. As outlined in the economics section, the underlying challenges facing markets remain largely unresolved.

Economics

In the previous week, the Federal Reserve took a notable step, lowering the federal funds rate by 25 basis points and signaling the possibility of two additional quarter-point cuts in the months ahead. In his post-meeting press conference, Chair Jerome Powell described the move as a “risk management” cut, noting that a very different picture is emerging as the labor market cools. He emphasized that there was no widespread support within the Committee for a larger 50 bp reduction. Some characterized Powell’s tone as more hawkish than expected, pointing to his downplaying of the Fed’s dot projections as evidence that this may not mark the beginning of a deeper cutting cycle. While lower short-term rates may offer some encouragement to financial markets, they provide little direct relief to mortgage rates and the long-struggling housing sector, which remains under pressure.

Labor market conditions also continue to weaken. Employment is a central driver of economic growth, and a deteriorating job market reduces the likelihood of sustained expansion. A weakening employment picture could also pressure consumers, particularly lower-income households, already experiencing financial strain from elevated prices and tight credit conditions.

At the same time, the path toward lower rates must be carefully balanced against a still-stubborn inflation backdrop. The latest PCE and core PCE deflator readings remain closer to 3% than the Fed’s 2% target, underscoring that inflation has not yet been fully tamed. This stickiness complicates the case for a deeper cutting cycle, as moving too aggressively could risk reigniting price pressures while the labor market is softening.

An uncertain political climate compounds these concerns. Indiscriminate tariff threats create additional headwinds, as tariffs are broadly viewed as poor economic policy that disrupts trade and planning. Beyond domestic issues, ongoing military conflicts in Europe and the Middle East add further instability, with the U.S. playing a complicated role in each.

Still, there are positives worth noting. Corporate earnings have generally remained strong. Some companies have slowed hiring in anticipation of weaker growth, which has helped protect margins. On the consumer side, spending has held up reasonably well, with credit card usage increasing, but delinquency rates are not yet showing signs of severe stress. These dynamics indicate that households and corporations retain a degree of resilience despite the more challenging macro backdrop.

Conclusion

The current backdrop is not conducive to excessive risk-taking. However, investors should by no means abandon equity markets altogether. The guiding principles remain: avoid committing short-term funds that may be needed within a year to longer-term assets, stay focused on long-term investing, and use periods of weakness to build positions selectively. In times of volatility, discipline, diversification, and a focus on quality remain essential. These principles help investors navigate uncertainty while positioning portfolios for long-term growth.

I. Front End Disclosure

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of 1919 Investment Counsel, LLC (“1919”). This material contains statements of opinion and belief. Any views expressed herein are those of 1919 as of the date indicated, are based on information available to 1919 as of such date, and are subject to change, without notice, based on market and other conditions. There is no guarantee that the trends discussed herein will continue, or that forward-looking statements and forecasts will materialize.

Statements concerning financial market trends or portfolio strategies are based on current market conditions, which will fluctuate. There is no guarantee that these investment strategies will work under all market conditions or are appropriate for all clients and each client should consider their ability to invest for the long term, especially during periods of downturn in the market. No representation is being made that any account, product, or strategy will or is likely to achieve profits, losses, or results similar to those shown.

All investments carry a degree of risk and there is no guarantee that investment objectives will be achieved.

This material has not been reviewed or endorsed by regulatory agencies. Third party information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

There is no guarantee that employees named herein will remain employed by 1919 for the duration of any investment advisory services arrangement.

1919 Investment Counsel, LLC is a registered investment advisor with the U.S. Securities and Exchange Commission. 1919 Investment Counsel, LLC, a subsidiary of Stifel Financial Corp., is a trademark in the United States. 1919 Investment Counsel, LLC, One South Street, Suite 2500, Baltimore, MD 21202. ©2025, 1919 Investment Counsel, LLC. MM-00002040

II. Investment Analysis

The information shown herein is for illustrative purposes. 1919 may consider additional factors not listed here or consider some, but not all, of the factors listed here as appropriate for the strategy’s objectives.

There is no guarantee that desired objectives will be achieved. 1919 has a reasonable belief that any third party information used for investment analyses purposes is reliable but does not represent to the complete accuracy of such information by any third party.

III. Portfolio Composition

For illustrative purposes. There is no guarantee that the portfolio composition for the strategy discussed herein will be comparable to the portfolio shown here.