Welcome to the monthly market update from Midland Wealth Management. I’m Chris Zabel, Portfolio Manager. Today, I wanted to take a few moments to share the Investment Team’s views regarding the economy and financial markets.
Employment Update
August payrolls increased by 22,000, though net revisions over the preceding two months removed a combined 154,000 jobs from the economy, taking a once strong payroll figure in June and turning it into a contraction of 13,000 jobs—the first contraction since December of 2020.
Further, an annual benchmark revisioning process by the Bureau of Labor Statistics concluded that the economy added 911,000 fewer jobs than had initially been reported between April 2024 and March of 2025, leaving the labor market in a more precarious position than expected.
An indicator of labor market tightness, the ratio of job openings to unemployed workers has fallen to 0.98, below the 10-year average of 1.10.
Fed Policy / Inflation
The Federal Open Market Committee met earlier this month and elected to cut its policy rate by 0.25%, lowering the target range to 4 to 4.25%. More emphasis was placed on balancing the risks of a weakening labor market to justify a more accommodative stance.
A cautious Fed will have a more difficult time balancing its dual mandate with the Fed’s preferred inflation gauge, Core PCE, remains north of its 2 % target.
Markets are expecting two more quarter-point rate cuts this year and two similar-sized cuts next year.
GDP
The final revision to Q2 GDP showed that the economy grew at a quarterly annualized rate of 3.8%, significantly stronger than previously estimated. The revision was boosted by stronger consumer spending and a larger-than-expected drop in imports. Real final sales to private domestic purchasers, a key measure of underlying demand, was revised up 1% to 2.9%.
Estimates for the economic growth in the third quarter are trending toward another strong print; however, recent research by Moody’s suggests that there is a growing divergence between states participating in this strong growth and those that have economies that are stagnating.
Equity/Fixed Income Markets
Equity markets brushed off the September effect, with emerging markets leading the way posting a gain of 6%, overtaking international developed markets on a year-to-date basis with a gain of 26.5%.
Much of these gains were due to a weakening dollar, which disproportionately helps the equities of emerging market companies denominated in their local currencies.
Stateside, the S&P 500 gained 3.2%, while small- and mid-cap companies continue to lag with returns of 0.8% and 0.3%, respectively.
In bond markets, longer-dated yields fell due to weaker labor market data discussed earlier, leading to expectations for further rate cuts.
The 30-year yield initially fell by 0.3% before settling 0.2% lower at 4.73%. Shorter dated yields, which are more sensitive to Fed policy, also moved lower.
Outlook
Looking forward to the final quarter of the year, which historically tends to be the strongest in terms of equity market returns, the team remains cautious about the evolving situation in the labor market and the forward path of inflation, given the persistent uncertainty around trade policy in the context of geopolitical shifts.
Despite the uncertainty, we remain focused on long-term fundamentals and disciplined risk management—positioning portfolios to navigate these potential disruptions while staying prepared to capitalize on opportunities as they emerge.
Thanks again for joining me for this month’s update, and as always, please contact your advisor or relationship manager with any questions you may have.
