The Sun Sets on Summer
September 2, 2025
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Labor Day and the unofficial end of summer have closed an impressively resilient period for global risk markets and provided solid performance year-to-date. Equity markets are at or near record levels, as are credit spreads for high-yield and investment-grade (IG) bonds.1 The S&P 500 Index has set 20 record highs in 2025.2 Meanwhile, last week’s personal consumption expenditures (PCE) core year-over-year reading of 2.9% shows inflation is still above target.3 However, the Federal Open Market Committee’s increased concerns surrounding labor markets have the market pricing in a rate cut at the September meeting.4 This week’s labor market readings — highlighted by Friday’s payroll number — could solidify the call for a cut if it comes in close to the forecasted 75,000 additional jobs, indicative of hiring slowing.5
The next several weeks could provide more interesting headlines. Last week, a federal appeals court ruled that most of President Trump’s global tariffs are illegal, adding another level of uncertainty. Likewise, the administration’s efforts to remove Governor Lisa Cook from the Federal Reserve (Fed) could inject additional volatility, raising questions about Fed independence. This comes as the central bank prepares for its rate decision on Sept. 17.
In corporate credit markets, the resilience of spreads with demand seemingly poised to buy the dips should create a favorable environment for investment-grade issuers. September is expected to be a busy month. Dealers expect IG supply near the $160 billion context for the month, slightly below last year’s record-setting amount.6 The call is for $55 billion this week alone.7 Most market participants have positioned themselves in the waning days of August to meet this supply. I anticipate the supply to be easily absorbed absent any injection of broader market volatility.
Sources:
1,2,4,6,7Bloomberg
3CNBC – Core inflation rose to 2.9% in July, highest since February; 8/29/25
5MarketWatch – U.S. Economic Calendar; as of 9/2/25
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