Weekly Macro Report, September 25 2025

1. Economic Growth & Outlook

The S&P 500 closed at 6,638 on September 24, marking an approximate 13.5% year-over-year gain from 5,842 a year earlier, reflecting sustained market momentum. U.S. GDP grew robustly at an annualized rate of 3.8% in Q2 2025, rebounding from a 0.6% decline in Q1. The Federal Reserve cut the target federal funds rate to 4.00–4.25% in mid-September, with futures implying further reductions by year-end. These readings indicate solid near-term growth prospects, moderate labor market easing, and persistent but manageable inflation pressures.

2. Labor Market

In August 2025, the US labor market showed signs of stagnation with nonfarm payrolls rising modestly by 22,000 and the unemployment rate ticking up to 4.3%, the highest since October 2021. Initial jobless claims declined to 218,000 in mid-September, but the four-week moving average remained elevated near 238,000, signaling persistent labor market weakness. This combination suggests the Federal Reserve may hold rates steady or pause further hikes as economic momentum dims but inflation risks remain uncertain.

3. Interest Rates

As of September 24, 2025, the 10-year Treasury yield edged up to approximately 4.15%, maintaining a slight steepening of the yield curve after the Fed's recent 25 bps rate cut. Investment-grade corporate yields hovered near 4.46%, reflecting ongoing tight credit spreads and resilient business borrowing costs. Meanwhile, 30-year mortgage rates rose modestly to about 6.39%, posing continued affordability challenges for homebuyers despite recent refinance demand increases. These movements signal mixed impacts: higher borrowing costs for households and businesses but steady returns for fixed-income investors.

4. Yield Spreads

As of late September 2025, the US Yield Curve shows a positive 10-2 year spread near 0.59%, indicating moderated but sustained economic growth expectations. The 10-year TIPS real yield has declined to around 1.73%, reflecting reduced real return demands amid expectations of lower Fed rates. US credit spreads remain relatively tight, signaling steady investor risk appetite despite mixed economic data and a poised Fed rate cut. Together, these metrics suggest cautious optimism for growth with balanced risk sentiment in the fixed-income market.

5. Inflation Dynamics

As of August 2025, U.S. headline CPI rose 2.9% year-over-year, driven primarily by shelter (+0.4% monthly), food (+0.5%), and energy (+0.7%) increases, despite energy declining year-over-year. Core CPI held at 3.1% annually, with shelter, medical care, and motor vehicle insurance as key contributors. August PPI growth slowed to 2.6% year-over-year, often leading CPI, signaling moderated upstream price pressures. The 10-year breakeven inflation rates remain stable, reflecting contained inflation expectations relative to some global peers with higher pressures.

6. Money Supply

As of August 2025, the M2 money supply in the U.S. reached $22.2 trillion, up 4.2% year-over-year, reflecting a steady but moderate growth pace compared to the sharp expansions seen earlier in the decade. Meanwhile, CPI inflation stands near 3% year-over-year, slightly below money growth but above typical economic growth rates, suggesting liquidity growth remains mildly inflationary. The main drivers of M2 expansion continue to be savings deposits and retail money market funds, indicating ongoing household liquidity accumulation rather than aggressive credit creation.

7. Consumer Sentiment

The University of Michigan Consumer Sentiment index fell to 55.4 in September 2025, down 4.8% from August, with expectations dropping more sharply to 51.8, widening the spread to -3.6 points. This negative spread, reflecting consumer caution amid job and inflation concerns, aligns with the positive yield curve spread of 0.59 between 10-year and 2-year Treasuries, signaling moderate confidence in longer-term growth. Households react to immediate financial pressures while bond markets price in broader economic forecasts and policy outlooks.