Market Insights Recap — Week of September 15, 2025

Hi, I'm Steve Orr, Chief Investment Officer for Texas Capital's Private Bank.

It's Fed week. What should we be thinking about in our portfolios? Going to give you three points: Economy, Fed and stocks.

Now for the economy, step back; look at the big picture. All-time highs. S&P 500, home prices, Bitcoin, gold, money supply. Federal debt at $37.5 trillion. So why cut? Well, CPI was in line, still heading higher. Producer price inflation trending higher. A small spike in jobless claims last week. But remember it's a week lag, and that's very typical for a four-day work week. So jobs data and surveys suggest manufacturing is in a rolling recession thanks to tariff uncertainty. But consumers continue to spend another roughly 60% of the economy, and stimulus is coming from over $320 billion in spending this year on data centers. So the economy remains in first gear, kind of rolling along; not too hot, not cold. 

The Fed, though, is going to focus on those weaker job numbers from this summer as a reason to cut rates, a quarter point on Wednesday and likely once more later in the fall. Speaking of jobs, changing demographics suggest we only need about 20,000 maybe 30,000 jobs per month to maintain status quo.

Interest rates and stocks both like lower short-term rates. We think the 10-year Treasury has bottomed for this cycle at around 4%. Global rates, however, are rising, pushed by inflation and deficit spending. Here at home, we expect longer-term rates to be higher a year from now, thanks to the same issues. So enjoy your cash returns for now, as cash is going to be lower by about a half a percent soon. Stock indices continue to make new highs. If you're in, that's great. But where to go? The average S&P stock is just not doing that much. For now, the Magnificent Seven are pulling the entire market higher. And one point though, when stock indices get this much overbought, they tend to keep rolling. Momentum can have its own inertia. And six and 12 months later, the indices are higher nearly 100% of the time when we've seen this overbought condition.

So, in summary, have patience as the Fed cuts rates and Congress starts blathering about government shutdowns; 'til next time.