Fed restart month: 25bp cut, stagflation fears ease
Monthly Performance
| Asset | Close | Change |
|---|---|---|
| S&P 500 (SPY) | 579.25 | +3.10% |
| Nasdaq 100 (QQQ) | 515.40 | +3.75% |
| Russell 2000 (IWM) | 232.70 | +4.22% |
| 20Y+ Treasury (TLT) | 94.55 | +3.18% |
| DXY | 97.85 | -2.22% |
| Gold | 3310.00 | +4.50% |
| VIX | 15.20 | -11.55% |
| Bitcoin | 88,500 | +5.52% |
Macro Dashboard
| Indicator | Month-end | vs. prior | vs. YoY |
|---|---|---|---|
| Recession probability (CVRP) | 37.00 | +5.00 | −17.00 |
| 10Y Treasury yield | 4.16% | −0.07pp | +0.35pp |
| 2s10s spread | 56bps | −8bps | +41bps |
| VIX | 16.28 | +0.92 | −0.45 |
| HY credit spread | 280bps | −4bps | −23bps |
| CPI (headline, YoY %) | 3.02% | — | — |
| Unemployment rate | 4.40% | +0.10pp | +0.30pp |
| WTI crude | $63.17 | −$1.19 | −$5.58 |
Values captured at month-end (last available daily observation). Sources: FRED (rates, credit, commodities, labor), BLS (CPI), Convex proprietary indices (CVRP).
What Happened
September 2025 marked a policy inflection as the Fed resumed cutting after a 9-month pause. The September 17 FOMC delivered 25 bps to 4.00-4.25%, citing "accumulating evidence that post-tariff supply-chain effects are transmitting to growth." The updated dot plot showed 2 additional cuts in 2025 and 4 in 2026, a meaningful dovish shift. Core PCE for August printed 3.0%, still above target but with monthly run-rates softening to 0.2%.
The S&P 500 gained 3.1% on the month as rate-cut resumption and Q3 earnings pre-announcements exceeded expectations. AI capex themes continued driving tech leadership: NVDA +9%, SMH +6%, hyperscaler group +4.5%. Small caps outperformed (IWM +4.2%) on rate-cut sensitivity. Utilities gained 3.5% on both AI power demand and lower rates. Homebuilders (ITB +7.5%) rebounded on mortgage rate declines.
The dollar weakened on narrowing rate differentials: DXY fell 2.2%. Gold gained 4.5% to $3,310, continuing its secular uptrend. Long-duration bonds rallied (TLT +3.2%). Bitcoin closed at $88,500, up 5.5%. The month established that the tariff-stagflation regime was resolving through growth adjustment rather than persistent inflation, the less-bad outcome for risk assets. The 10Y yield closed at 3.95%, below 4% for the first time since March 2025.
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