Here are the latest market insights from the Goldman Sachs Wealth Management Investment Strategy Group (ISG).
Despite September often being a weak month for equities, both the S&P 500 and the Nasdaq posted strong returns of 3.7% and 5.7%, respectively.
Here’s a recap on what happened in the market and economy.
The stock market rally reflected several drivers:
Outside the US, equities also performed well, with MSCI EAFE up 1.8% and MSCI EM up 7.2%.
In bond markets, yields moved sharply in the US. In the first half of the month, the 10-year US Treasury yield rallied to 4.0%, driven by rising recession fears.
The move largely reversed in the second half of the month as US macro data—retail sales, new home sales, and Q2 GDP—surprised to the upside. As a result, the US 10-year edged back higher to 4.15%. The US dollar (DXY) was broadly unchanged on the month.
In the US, the latest data revisions suggest growth was stronger than expected in the first half of the year. Second-quarter GDP was revised up to 3.8% from 3.3%, driven by final domestic sales. This contrasts with a weakening labor market: nonfarm payrolls slowed to 22,000 in August from 79,000 in July.
The reasons GDP looks stronger than the labor market include:
ISG still expects GDP to slow into the end of the year, driven by weakening real labor income as the labor market softens further and inflation rises as higher tariffs are passed through to consumers.
Nevertheless, the slowdown will likely be more modest than initially expected, as consumption appears resilient in the third quarter. Taken together, ISG has upgraded their 2025 annual growth forecast to 2.0% from 1.7% initially.
In September, the Federal Reserve resumed its cutting cycle with a 25-basis-point rate cut, as “job gains have slowed and the unemployment rate has edged up,” according to Chair Jerome Powell.
ISG continues to expect two additional rate cuts this year, consistent with the median Fed dot and market pricing, and three cuts next year when some economic slack is likely to emerge while the tariff impact on inflation wanes.
As always, ISG will be closely watching the upcoming central bank meetings, paying special attention to the US government shutdown and labor market data. In Europe, the focus will continue to be on the political developments in France and fiscal policy in the UK.
Expectations and forecasts are based on material assumptions which are subject to change and provide no guarantee of results.
This material represents the views of the Investment Strategy Group (ISG) in Goldman Sachs Asset & Wealth Management (AWM) and is not a product of Goldman Sachs Global Investment Research (GIR). It is not research and is not intended as such. The views and opinions expressed by ISG may differ from those expressed by GIR, LP, or other departments or businesses of Goldman Sachs. Forecasts are estimated, based on assumptions, and subject to revision and may change as economic and market conditions change. Past performance is not indicative of future results which may vary.
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