Q3 Market Update
Market Summary¹:
Key Stock Market Index Performance: The third quarter showed continued strength in US equities highlighted by outperformance in small cap stocks:
S&P 500 (^SPX): delivered a total return of +8.12% for Q3, closing September at 6,688.46 and rising +7.8% during the quarter.
Dow Jones Industrial Average (^DJI): returned +5.67% for Q3.
Nasdaq Composite (^IXIC): returned +11.24% total return, setting new all-time highs in September.
Russell 2000: outperformed with a +12.39% total return for the quarter.
Sectors leading the advance included information technology and communication services, while in the more traditional defensive sector, consumer staples declined.
Value vs. Growth Performance:
Russell 1000 Growth [+10.51%] index nearly doubled the performance of Russell 1000 Value total return [+5.33%] for the quarter. In Small Cap stocks, the Russell 2000 Value [+12.60%] outpaced the Russell 2000 Growth index [+12.19%].
Market concentration increased over the quarter, driven by outperforming mega-cap companies. As of 9/30/2025 the top 10 companies by market capitalization in the S&P 500 index made up nearly 40% of the index value².
Economic Overview³:
Recent indicators suggest growth of economic activity has moderated to around 1.5% in the first half of 2025, down from 2.5% in 2024.
The Fed slightly upgraded its growth outlook for 2026 but remains cautious.
Interest Rate Decision
On September 17, 2025, the Fed cut the benchmark interest rate by 0.25 percentage points, bringing it to a range of 4.0%–4.25%.
Powell described the move as a “risk management cut” saying, “What’s different now is that you see a very different picture of the risks to the labor market”.
Labor Market conditions:
Unemployment rose to 4.3% in August.
Job gains slowed to just 29,000 per month over the past three months.
Wage growth is moderating, though still outpacing inflation.
The Fed chair recently noted, “the downside risks to employment appear to have risen”.
Inflation:
Inflation remains above the Fed’s 2% target:
Core PCE inflation rose 2.9% over the past year.
Goods prices are driving most of the recent inflation increase.
Services inflation is showing signs of disinflation.
Future Outlook:
The Fed slightly upgraded its growth outlook for 2026 but remains cautious.
Sources:
Source yCharts.com
JPM Guide to the Markets as of September 30, 2025
Transcript of Chair Powell’s Press Conference September 17th, 2025
IMPORTANT DISCLOSURES
The opinions expressed herein are those of Ballast Advisors, LLC and are subject to change without notice. The third-party material presented is derived from sources Ballast Advisors consider to be reliable, but the accuracy and completeness cannot be guaranteed. Past performance is not indicative of future results. Nothing contained herein is an offer to purchase or sell any product. This material is for informational purposes only and should not be considered investment advice. Ballast Advisors reserve the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, legal, or retirement advice or recommendations. The information presented here is not specific to any individual's personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice. Ballast Advisors, LLC is a registered investment advisor under the Investment Advisers Act of 1940, as amended. Registration does not imply a certain level of skill or training. More information about the firm, including its services, strategies, and fees can be found in our ADV Part 2, which is available without charge upon request. BAL-25-58
