September 27, 2025 Market Update

Market Recap

Stocks were mostly flat this week despite a steady stream of encouraging economic data.  New applications for unemployment benefits fell, second-quarter GDP growth was revised higher, and durable goods orders in August were strong.  Perhaps most importantly, the August Personal Consumption Expenditures Price Index came in as expected, suggesting inflation remains under control.

In the bond market, prices weakened across most maturities as yields rose.  Short-term treasuries posted modest gains as investors favored liquidity, while intermediate- and longer-term Treasuries declined on signs of resilience in the broader economy.  Credit markets also trended marginally lower, with both investment-grade and high-yield bonds taking a pause.

So why didn’t the stock market respond more favorably to the good news?  A strong economy gives the Federal Reserve room to move more cautiously with interest-rate cuts.  For now, Mr. Market seems just as focused on the Fed’s response to economic data as on the data itself.

Market Performance

Market Commentary

While U.S. equities have delivered solid gains so far this year, international markets have generally done even better.  Greek stocks lead the pack, with an ETF tracking the market up more than 60% year-to-date, while markets in Spain, Poland, Austria, and Italy have each delivered returns north of 40%.

The rally hasn’t been confined to Europe.  Emerging markets including Brazil, Mexico, China, and South Africa have also outpaced the S&P 500.  A weaker dollar has helped, but valuations tell the bigger story.  With many U.S. market leaders trading at or near record highs, foreign markets entered the year at more modest levels, leaving greater room for gains as sentiment improved.  And while the valuation gap between U.S. equities and international equities has narrowed somewhat this year, U.S. stocks still trade at a premium.

For U.S. investors, the message is clear.  Concentrated gains in a handful of domestic technology giants can distract from opportunities abroad, and valuation gaps across world markets can create meaningful differences in performance.  Over time, spreading investments across regions can help smooth the ups and downs that come with relying too heavily on any single market.

In Case You Missed It

On Tuesday, OpenAI, in partnership with Oracle and SoftBank, unveiled Project Stargate, a $400 billion initiative to construct five U.S. data centers in Texas, New Mexico, and Ohio.