August Employment Data Locks In Expected Rate Cut

Market Commentary – September 8, 2025

Last week, the August employment report came in weaker than expected, with a mild uptick in the unemployment rate to 4.3% from 4.2%.

But on the positive side, average hourly wages ticked down to 3.7%. The market is now expecting a 25 basis point interest rate cut by the Federal Reserve (Fed) this month to support a weaker labor market. The market is also expecting additional interest rate cuts later this year. But with this week’s release of the Producer Price Index (PPI) and Consumer Price Index (CPI), any sign that inflation is firming could rule out further rate cuts. What all this means is that volatility is to be expected.

The expected September rate cut is driving interest rates down on the 2-Year and 10-Year Treasury yields, a move that we have been anticipating. Last Friday, the equity market started the trading session up on the lower rates, hitting record highs, but quickly turned around and fell into negative territory. This is not surprising as stocks are extended with high valuations. Historically, September is the weakest month of the year with October typically one of the best buying opportunities. We expect some downside and consolidation within a 5.0%-10.0% range or choppiness with sector rotation. We still anticipate a rally into year-end with the S&P 500 hitting 7000 by year-end. Our longer-term projection is for the S&P 500 to hit 10,000-13,000 by the end of the decade.