Fundstrat
Fundstrat's Mark Newton: Are Pullbacks Just Setting Up a Year-End Rally?
9/26/2025, 1:14:53 PM
Economic Summary
- August PCE headline rose 0.3% month-over-month and 2.7% year-over-year; Core PCE rose 0.2% month-over-month and 2.9% year-over-year, indicating inflation roughly in line with expectations.
- Consumer spending outperformed with a 0.6% monthly gain and incomes rose 0.4%, signaling continued consumer resilience supporting growth.
- GDP and jobless claims were stronger than expected, fostering a 'Goldilocks' view that the economy is holding up and reducing near-term recession bets.
- Markets and Fed funds futures price roughly 1.5 rate cuts by year-end and about four cuts by next summer, implying easing expectations contingent on incoming data.
- Seasonal patterns show a modest historical dip (~0.7%) from Rosh Hashanah to Yom Kippur, often followed by a strong rally; tech leadership and small-cap strength remain key market drivers.
Bullish
- PCE inflation came in as expected (Core YoY 2.9%), suggesting contained inflationary pressures.
- Strong GDP and jobs data, plus resilient consumer spending, reduce near-term recession risk.
- Technology strength is powering the market; small caps and biotech likely to benefit from expected rate cuts.
Bearish
- Fed internal dissent and jockeying for Powell's replacement could create policy uncertainty and volatility.
- Overbought technology leadership risks a correction after a strong run-up.
- Geopolitical or fiscal risks like a potential government shutdown could trigger short-term market weakness.
MORN
Bullish
Morningstar noted the tariff story may be easing, a perspective markets view as supportive.
People mentioned
Mark NewtonTom LeeMariaCheryl KosonyJerome Powell