Financial markets rallied to close out the third quarter, with investors getting a boost from the Fed finally cutting rates after being on hold since December.
The S&P 500 advanced +3.7% in September, with the blue-chip index now up 15% year-to-date.
Smaller company stocks gained +3% for the month, with the Russell 2000 Index now 10% in 2025.
International stocks added +3.6% in September, spurred on by a strong month for Emerging Markets stocks, with the MSCI ACWI ex-US Index up +26% through the first three quarters.
Fixed income prices also rallied in September, with long-term rates falling on the hope of continued rate cuts into year-end. The Bloomberg Aggregate Bond Index gained another +1% this month and is now up +6% for 2025.
Commodity markets ticked higher, led by another record closing high in gold prices, as the Bloomberg Commodity Index added +2% in September (+9% year-to-date).
Our proprietary Three Dials allocation framework was unchanged during the month of September, as we outline below:
After surviving what has historically been the toughest month for stock returns, the calendar now turns in investors’ favor, with the fourth quarter typically exhibiting the strongest returns as buyers tend to chase returns into year-end.
With all major indexes entering the home stretch on solid footing, our Momentum Dial stays in a Positive position.
While rate cuts should help equity markets in the short-term, the Fed is more concerned with stimulating the labor market, which appears poised to add fewer than 100,000 jobs for the fifth consecutive month, the weakest period of job growth since the Great Financial Crisis.
With continued weakness in key economic indicators, our Fundamental Dial remains in a Negative position.
Oracle became in the latest darling in the AI space, with the stock adding $230 billion in market cap after citing huge demand for AI workloads in their quarterly earnings report. However, at debt-to-equity levels more than twice that of their competitors, this surge raises another potential red flag for unsustainable valuations in the tech space. As such, our Valuation Dial remains Negative.
On balance, our composite positioning remains somewhat defensive, with one dial in a Positive position but two dials remaining Negative.
Sources: Morningstar