Executive Summary
Financial markets have weathered months of policy-driven volatility, and after a nearly 20% decline, the S&P 500 has regained all its losses and set numerous all-time highs. What remains is a sharply higher effective tariff rate and uncertainty about the impact of 2026 corporate earnings, consumer demand, and economic growth. While easing tensions and trade deals have removed the worst-case scenario, the full impact of recent events may take months or longer to become known. We see a resilient but narrowing economic expansion whose sustainability hinges on three factors: (1) how quickly the Fed cuts and whether it can cushion slowing growth; (2) whether the AI-driven cap-ex boom continues to drive GDP growth and translates into productivity gains; and (3) the extent to which tariffs reignite goods inflation. Further gains depend on AI capex, solid earnings, and Fed rate cuts, but a gradual economic slowdown and tariffs introduce downside risks.
Equities
The S&P 500 returned +0.4% for the week. Markets hit an all-time high mid-week as traders began to price in rate cuts from the Fed, but then retreated on Friday after a weak jobs report increased concerns about the state of the labor market. Small cap stocks rose 1.1%, extending their streak of outperforming large caps to 4 weeks. Communication services (+5.1%) and consumer discretionary (+1.7%) led the S&P 500; energy (-3.5%) and financials (-1.7%) were the laggards. EAFE markets returned +0.3% with Japan (+0.7%) leading, while EM markets returned +1.4% with China (+1.9%) and India (+1.6%) leading.
From a valuation perspective, the S&P 500, the NASDAQ, and EM trade at or above +1 standard deviation based on historical forward P/E ratios, with the S&P 500 at +1.9, the NASDAQ at +1.1, and EM at +1.2. For the next 12 months, EPS growth for S&P 500 is expected to be 8.5% (vs. 6.9% annualized over the last 20 years). For the next 12 months, EPS growth for NASDAQ is expected to be 13.9% (vs. 10.7% annualized over the last 20 years). Equities across markets caps in the U.S., and in non-U.S. developed and emerging markets, trade at or above their 20-year averages based on forward P/E ratios.
Fixed Income
Investment grade fixed income sectors had positive returns as rates fell across the curve. Municipals returned +0.8%, US AGG returned +0.9% and US IG returned +1.2%. HY bonds returned +0.3% while bank loans returned +0.2%. EM debt returned +0.6% with the U.S. dollar flat.
Rates
Rates fell sharply across the curve on the back of the weak jobs report. The recession-watch 3M-10Y spread compressed 2bps but remains positive at +6. The 2Y-10Y spread compressed 5bps to +56. Rates fell in other developed markets as well. The BTP-Bund spread is at 0.84%. 5-year breakeven inflation expectations fell 7bps to 2.46% (vs. low of 1.88% on Sept 10); 10-year breakeven inflation expectations fell 4bps to 2.37% (vs. recent low of 2.03% on Sept 10); the 10Y real yield fell 11bps to 1.70%. The market now expects three cuts in 2025 vs the Fed’s guidance of two cuts. At year-end 2025, the market expects the Fed Funds rate to be 3.62% vs. the Fed’s guidance of 3.75%-4.00%.
Currencies/Commodities
The dollar index was flat. The commodities complex fell 1.1% as energy prices fell 1.9% for the week. Brent prices fell 3.8% to $66/bbl as markets began to anticipate weaker growth ahead. U.S. natural gas prices rose 1.7% while European gas rose 1.3%.
Market monitors
Volatility was flat for equities but rose for bonds (VIX = 15, MOVE = 86); the 10-year average for each is VIX=19, MOVE = 80. Market sentiment (at midweek) fell from -5 to -11 as retail investors remain cautious. midweek) rose from -14 to -5, but still reflects weak consumer sentiment.
Weekly Commentary
Investment Commentary – September 8, 2025
Stuart Katz
Executive Summary
Financial markets have weathered months of policy-driven volatility, and after a nearly 20% decline, the S&P 500 has regained all its losses and set numerous all-time highs. What remains is a sharply higher effective tariff rate and uncertainty about the impact of 2026 corporate earnings, consumer demand, and economic growth. While easing tensions and trade deals have removed the worst-case scenario, the full impact of recent events may take months or longer to become known. We see a resilient but narrowing economic expansion whose sustainability hinges on three factors: (1) how quickly the Fed cuts and whether it can cushion slowing growth; (2) whether the AI-driven cap-ex boom continues to drive GDP growth and translates into productivity gains; and (3) the extent to which tariffs reignite goods inflation. Further gains depend on AI capex, solid earnings, and Fed rate cuts, but a gradual economic slowdown and tariffs introduce downside risks.
Equities
The S&P 500 returned +0.4% for the week. Markets hit an all-time high mid-week as traders began to price in rate cuts from the Fed, but then retreated on Friday after a weak jobs report increased concerns about the state of the labor market. Small cap stocks rose 1.1%, extending their streak of outperforming large caps to 4 weeks. Communication services (+5.1%) and consumer discretionary (+1.7%) led the S&P 500; energy (-3.5%) and financials (-1.7%) were the laggards. EAFE markets returned +0.3% with Japan (+0.7%) leading, while EM markets returned +1.4% with China (+1.9%) and India (+1.6%) leading.
From a valuation perspective, the S&P 500, the NASDAQ, and EM trade at or above +1 standard deviation based on historical forward P/E ratios, with the S&P 500 at +1.9, the NASDAQ at +1.1, and EM at +1.2. For the next 12 months, EPS growth for S&P 500 is expected to be 8.5% (vs. 6.9% annualized over the last 20 years). For the next 12 months, EPS growth for NASDAQ is expected to be 13.9% (vs. 10.7% annualized over the last 20 years). Equities across markets caps in the U.S., and in non-U.S. developed and emerging markets, trade at or above their 20-year averages based on forward P/E ratios.
Fixed Income
Investment grade fixed income sectors had positive returns as rates fell across the curve. Municipals returned +0.8%, US AGG returned +0.9% and US IG returned +1.2%. HY bonds returned +0.3% while bank loans returned +0.2%. EM debt returned +0.6% with the U.S. dollar flat.
Rates
Rates fell sharply across the curve on the back of the weak jobs report. The recession-watch 3M-10Y spread compressed 2bps but remains positive at +6. The 2Y-10Y spread compressed 5bps to +56. Rates fell in other developed markets as well. The BTP-Bund spread is at 0.84%. 5-year breakeven inflation expectations fell 7bps to 2.46% (vs. low of 1.88% on Sept 10); 10-year breakeven inflation expectations fell 4bps to 2.37% (vs. recent low of 2.03% on Sept 10); the 10Y real yield fell 11bps to 1.70%. The market now expects three cuts in 2025 vs the Fed’s guidance of two cuts. At year-end 2025, the market expects the Fed Funds rate to be 3.62% vs. the Fed’s guidance of 3.75%-4.00%.
Currencies/Commodities
The dollar index was flat. The commodities complex fell 1.1% as energy prices fell 1.9% for the week. Brent prices fell 3.8% to $66/bbl as markets began to anticipate weaker growth ahead. U.S. natural gas prices rose 1.7% while European gas rose 1.3%.
Market monitors
Volatility was flat for equities but rose for bonds (VIX = 15, MOVE = 86); the 10-year average for each is VIX=19, MOVE = 80. Market sentiment (at midweek) fell from -5 to -11 as retail investors remain cautious. midweek) rose from -14 to -5, but still reflects weak consumer sentiment.
Disclosure and Source
Investment Commentary Sources: Bloomberg. Investment advisory services offered through Robertson Stephens Wealth Management, LLC (“Robertson Stephens”), an SEC-registered investment advisor. Registration does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. This material is for general informational purposes only and should not be construed as investment, tax or legal advice. It does not constitute a recommendation or offer to buy or sell any security, has not been tailored to the needs of any specific investor, and should not provide the basis for any investment decision. Please consult with your Advisor prior to making any Investment decisions. The information contained herein was carefully compiled from sources believed to be reliable, but Robertson Stephens cannot guarantee its accuracy or completeness. Information, views and opinions are current as of the date of this presentation, are based on the information available at the time, and are subject to change based on market and other conditions. Robertson Stephens assumes no duty to update this information. Unless otherwise noted, any individual opinions presented are those of the author and not necessarily those of Robertson Stephens. Indices are unmanaged and reflect the reinvestment of all income or dividends but do not reflect the deduction of any fees or expenses which would reduce returns. Past performance does not guarantee future results. Forward-looking performance targets or estimates are not guaranteed and may not be achieved. Investing entails risks, including possible loss of principal. Alternative investments are only available to qualified investors and are not suitable for all investors. Alternative investments include risks such as illiquidity, long time horizons, reduced transparency, and significant loss of principal. This material is an investment advisory publication intended for investment advisory clients and prospective clients only. Robertson Stephens only transacts business in states in which it is properly registered or is excluded or exempted from registration. A copy of Robertson Stephens’ current written disclosure brochure filed with the SEC which discusses, among other things, Robertson Stephens’ business practices, services and fees, is available through the SEC’s website at: www.adviserinfo.sec.gov. © 2025 Robertson Stephens Wealth Management, LLC. All rights reserved. Robertson Stephens is a registered trademark of Robertson Stephens Wealth Management, LLC in the United States and elsewhere. A2536
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