Weekly Investment Update (09/05/2025)

Markets digested a softer-than-expected September jobs report this week, further cementing expectations for a Fed rate cut later this month. While there is clear evidence that the labor market is cooling — particularly through softer hiring reflected in elevated continuing claims — we do not see signs of a recession. Initial jobless claims remain stable, suggesting that weakness is being driven more by restrained hiring than by widespread layoffs.

We’re also mindful that September is historically the weakest month of the year for equities. After an impressive rebound from April lows, some near-term volatility would not come as a surprise. That said, we remain constructive on the outlook and view any softness as temporary. Looking ahead, we see powerful market tailwinds forming — from renewed fiscal stimulus via the new tax bill to monetary policy easing, to continued momentum in AI-driven capital investment. In combination, we believe these factors will stabilize growth into 2026, ultimately allowing corporate earnings growth to drive markets higher.

Soft Labor Market Data Sets the Stage for a September Policy Rate Cut

What is happening: The August jobs report showed a notable slowdown in hiring. Nonfarm payrolls rose by just 22,000, below expectations for 75,000, with the prior two months’ statistics revised down by a cumulative 21,000. June’s figure turned negative, marking the first outright decline in employment since 2020. The three-month average gain now stands at only 29,000.

The unemployment rate ticked up to 4.3% from 4.2% as participation improved slightly. Wage growth cooled to 3.7% year-over-year from 3.9%, with weekly earnings even softer at 3.4% due to a shorter workweek. The Household Survey offered a brighter view, showing a 288,000 increase in employment alongside a larger labor force.

Job gains were concentrated in healthcare and social assistance, though this was the sector’s smallest increase since early 2022. Losses in manufacturing and wholesale trade highlight ongoing weakness in the more cyclical parts of the labor market, with tariffs continuing to weigh on activity.

Why it matters: Soft job-market data across payrolls, ADP, JOLTs, and ISM surveys confirm labor market momentum is cooling. The payroll report strengthens the case for the Fed to resume easing, with a 25-basis-point rate cut in September now widely expected, barring an inflation surprise. Powell has already emphasized that employment risks are growing and that policy decisions reflect cumulative evidence rather than one data point.

The rise in unemployment to 4.3%, the highest level in nearly four years, is still historically healthy but adds weight to dovish arguments for additional easing. While the market-implied odds of a 50-basis-point move in September remain low, futures now imply three total cuts this year. December cut odds have increased the most from the prior week, with a 25-basis-point cut at each meeting for the rest of the year largely priced in by investors.

Treasury yields fell, with the 2-year yield down to 3.5% and the 10-year now trading at 4.1% vs 4.3% earlier this week. Against this backdrop, we maintain a longer duration vs. our fixed income benchmarks, and remain focused on high-quality companies with durable earnings power, which we believe are well positioned to compound earnings amid policy and economic shifts.

Seasonal Swings Should Not Unsettle Long-Term Investment Plans

What is happening: Historically, September has been the weakest month of the year for stock market performance. From 1928 to 2024, the S&P 500 averaged a loss of 1.2% during September, finishing positively only 45% of the time. In contrast, the average return across all months since 1928 is 0.62%.

As with all seasonal patterns, performance varies. In September 2010, the S&P 500 gained 8.8% — the best month of that year, and the September month returns of 2012, 2013, 2017, and 2019 were also positive. Last year, the market fell 4% during the first five trading days of September before finishing the month up 2%. Historically, when equity markets have been particularly weak in September, a strong rebound in October has often followed. The period from October to January is typically a seasonally strong period for the market, with average returns of 4% since 1928. 

This seasonal weakness reflects several recurring factors. Institutional investors typically rebalance portfolios in September ahead of year-end, while mutual funds sell losing investments to manage taxes before their fiscal years close. Retail participation, buoyant during the summer, tends to slow. Corporate buybacks, an important pillar of equity demand over the past decade, tend to pause as firms enter blackout periods ahead of earnings announcements. At the same time, bond markets enter their busiest issuance window, prompting some investors to rotate out of equities to participate in a large number of bond offerings.

Why it matters: While historical patterns and seasonal trends can inform short-term market expectations, relying solely on seasonality alone has not proven to be a successful long-term strategy. In the short term, equity markets are influenced by many factors beyond seasonal patterns, such as economic indicators, geopolitical events, and company-specific developments. Timing markets solely based on seasonal patterns may result in overlooking crucial market dynamics and can lead to missed appreciation and unnecessary risks. Moreover, historical data has shown that timing the markets may often lead to losses. 

We believe the most effective strategy for reaching long-term investment goals is to stay invested while adjusting portfolio positioning based on a thorough understanding of underlying economic and financial factors. Bessemer maintains an overweight position to equities relative to respective benchmarks and expects forthcoming interest-rate cuts to help support earnings growth and the overall level of the S&P 500 in the short to medium term.