Week of September 15, 2025

Key Points for the Week

• Stocks gained again last week, with more new highs across the board and the Dow above 46,000 for the first time in history
• The Fed meets this week, and it looks like they are going to bet that the recent rise in inflation will be “transitory.”
• The Fed may cut rates for the first time since December based on a weakening labor market.
• The Fed's willingness to potentially cut interest rates despite rising inflation could be bullish for stocks.

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Current Trends & News is a weekly financial recap curated by SPC Financial®'s team of wealth management and tax-integrated advisors. We monitor and explore the intricacies of the financial world and share insights into market developments.

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Economic Update

Inflation occurs when the prices of goods and services increase. Last week, the Consumer Price Index (CPI) showed that inflation moved modestly higher from July to August. Prices increased 2.9 percent, year over year, remaining above the Federal Reserve's long-term goal of 2 percent inflation. Overall, prices increased 0.4 percent, month over month, from July to August.

Grocery prices rose faster than other prices. The cost of fresh fruits and vegetables rose 1.6 percent from July to August, led by tomato prices, which were 4.5 percent higher. The cost of meat also rose faster than headline inflation, up 1.0 percent month over month, with a 2.7 percent rise in the beef index. In contrast, the price of sweet rolls, coffee cakes, and doughnuts fell by 2.3 percent month over month, and egg prices remained steady.

Why did food prices rise?

“Tariffs are a factor, but they are only one piece of the puzzle. Food costs are also climbing because of labor shortages in production and distribution, elevated transportation expenses, and weather events that disrupt harvests and livestock production.”

Restaurant-industry source cited by Megan Leonhardt, Barron's

Consumers anticipate prices may increase further, according to the University of Michigan's September Consumer Sentiment Index, which was released last week.

"Year-ahead inflation expectations held steady at 4.8 [percent], unchanged from August. Long-run inflation expectations moved up for the second straight month to 3.9 [percent] in September. This current reading is considerably lower than the 4.4% seen in April.”

Joanne Hsu, Surveys of Consumers Director

Stock markets were undaunted by economic data.

Investors remained confident that weakness in the labor market would weigh more heavily in the Fed's rate decision next week than inflation data would.

“Markets have fully priced in a September cut and now anticipate three reductions this year, compared to two just weeks ago."

Indradip Ghosh, Reuters.

Market optimism pushed major U.S. stock indexes higher last week. Treasuries were mixed, with yields on the longest maturities of Treasuries ending the week near where they started it.

The Federal Reserve

Inflation remains elevated, but the Federal Reserve (Fed) may cut interest rates for two reasons: 1) the labor market is weak; 2) they'll argue that increasing inflation is transitory.

The Consumer Price Index (CPI) for August showed that inflation is increasing. Headline CPI rose at an annualized pace of 4.7% in August on the back of higher food and energy inflation. The index is now up 2.9% over the last twelve months, the fastest pace since January. The Fed tends to focus on “core inflation,” which strips out volatile food and energy prices, but that was higher too. Core CPI rose at an annualized pace of 4.2% in August and is up 3.1% over the past year. A year ago, in August 2024, core CPI was 2.6% and trending lower. That's not the case now, as inflation remains well above the Fed's target of 2% and crucially is moving in the wrong direction.

The most obvious source of inflation is tariffs, and it's showing up where you would expect it to—in durable goods. Here's how CPI for durable goods has moved:

• August: +3.4% annualized pace
• Last 3 months (June – August): +2.8% annualized
• Last 12 months: +1.5%

We are seeing accelerating durable goods inflation on the back of tariffs. Here's a look at annualized inflation over the last three months for several categories within durable goods:

• Used cars: +3.4%
• Apparel: +4.1%
• Household furnishings and supplies: +7.3%
• Tools and hardware: +11.8%
• Video and audio products (like TVs): +10.1%

Keep in mind that prices for durable goods were falling prior to March, reverting to their pre-pandemic trend after the big spike in 2021-2022. The pickup in inflation is a big reason why overall inflation numbers are going the wrong way. At the same time, tariffs should only have a one-time impact on prices, unless tariffs continuously ratchet higher. That means any tariff-related inflation should be “transitory” (though it may show up over the course of several months). The Fed is likely to make this argument, allowing them to look past elevated inflation.

Tariff-related inflation is not the only source of inflation. The two other big pieces of the inflation basket are housing (shelter) and services outside of housing. We've written a lot about housing over the last few years, in particular how official shelter inflation has a severe lag to what's happening in real time. Until last year official statistics were still showing elevated shelter inflation, but that was capturing what happened a couple of years ago when rents were rising. Private data indicates that rents have been cooling for over two years now. The good news is that official inflation data is finally starting to reflect that reality and is a major source of disinflation. (Rent and owners' equivalent rent make up 44% of the core CPI basket, and so it matters a lot.) Rents did pick up in August but that's likely to reverse given what we're seeing in the private data.

The problem is services outside of housing, including things like transportation services, pet services, personal care, and medical care. Normally, you'd expect to see elevated inflation in these categories when the labor market is running hot—if people earn more, they'll tend to spend more on these services (like in 2021-2023). The labor market is clearly running weak, and so it's bit of a puzzle as to why services inflation remains elevated. But the reality is that it is, and CPI for services excluding housing has been accelerating recently:

• August: +4.0% annualized pace
• Last 3 months (June – August): +4.2% annualized
• Last 12 months: +3.3%

For perspective, CPI for services ex housing ran at an annualized pace of 2.2% in 2017–2019.

August payrolls were weak, especially with revisions and a higher unemployment rate, and that pushed investors to price in a 100% probability of a rate cut at the Fed's meeting this week. The latest report on unemployment claims also showed a concerning increase last week, indicating more workers got laid off and filed for unemployment benefits. Claims are now well above levels we saw during this same week in 2023–2024 and even 2018–2019. Granted, this is only one week of data (and driven by a large increase in claims from Texas) and so it's an open question whether it's the start of a trend. Still, it only bolsters the Fed's case for cutting rates on the back of labor market weakness.

Markets currently expect the Fed to start a series of rate cuts beginning in September, taking the Fed policy rate from 4.4% to below 3% by the end of 2026. And investors don't expect rates to go back up until at least 2028, and only gradually. In other words, markets expect the Fed to cut rates quite rapidly over the next year or so. But this is where there may be a disconnect between what the market expects and what Fed members are thinking. Given inflation heat, the Fed may not be ready to commit to a series of rate cuts beyond a couple of more this year, at least not as much as the market expects.

Nevertheless, the big picture is that the Fed is going to start cutting rates once again after a nine-month pause, even as inflation remains elevated (and going in the wrong direction). That is bullish for the market. It means the Fed's priority is to protect the labor market (and the economy) even at the risk of prices running hot.

A Scarcity of Reading

We live in an information-rich world where people spend hours perusing social media. There's even a slang term to describe it: brain rot. The term “refers to material of low or addictive quality, typically in online media, that preoccupies someone to the point it is said to affect mental functioning," according to the Merriam Webster dictionary.

“The wealth of information means a dearth of something else: a scarcity of whatever it is that information consumes. What information consumes is rather obvious: it consumes the attention of its recipients. Hence a wealth of information creates a poverty of attention and a need to allocate that attention efficiently."

Nobel Prize-winner Herbert Simon

Reading appears to be suffering from a poverty of attention.

In 2004, about 28 percent of the 10,000 people who participated in the government's “American Time Use Survey” read print or digital books, perused magazines, or listened to audiobooks for the pleasure of it, according to a 2025 research paper published in iScience. Twenty years later, just 16 percent did.

Falling literacy levels may affect the desire to read. The Program for The International Assessment Of Adult Competencies (PIAAC) uses a 500-point scale to measure literacy and divides its assessment into six levels of literacy.

• Below Level 1, Level 1: In 2023, 28 percent of U.S. adults, ages 16 to 65, scored at these levels, a 10 percent increase from a decade earlier.
• Level 2. In 2023, 29 percent of U.S. adults scored at this level, down from 33 percent a decade earlier.
• Levels 3, 4, and 5: In 2023, 44 percent of U.S. adults were at this level, down from 50 percent a decade earlier.

When compared to the 31 countries and subnational economies that participated in the study, the U.S. ranked 14th in literacy.

Reading skills affect economic growth

There is a significant relationship between reading and economic well-being, according to 2020 research conducted by Gallup and The Barbara Bush Foundation for Family Literacy.

"Eradicating illiteracy would have enormous economic benefits. This analysis finds that getting all U.S. adults to at least a Level 3 of literacy proficiency would generate an additional $2.2 trillion in annual income for the country. That is 10 [percent] of the gross domestic product.”

Principal Economist Jonathan Rothwell, Gallup

A Reminder About Scams

Scams usually start with a phone call, email, text, or another form of communication. The person typically claims to be from an agency or organization you know – or one that sounds like it might benefit you, such as the National Sweepstakes Bureau or a lottery.

The person may know your name and address. They may give you their official title or an identification number. No matter how official they seem, you can be confident it is a scam if the person contacting you:

• Indicates there is a problem with your benefits.
• Asks you to pay to receive a prize.
• Suggests that paying will increase the chance of winning.
• Requests financial information, such as a bank account or credit card number.
• Pressures you to act immediately.
• Tells you to pay using a specific method, such as a gift card or cryptocurrency.

If this happens, remember that the Social Security Administration, the Internal Revenue Service, Medicare, and your bank do not call, email, or text to ask for money or personal information. They do not demand that you pay immediately, and they do not accept payment by gift card, prepaid debit card, cryptocurrency, or another untraceable form of money transfer.

When you suspect a scam:

• Hang up or close the message. Do not respond in any way.
• Remain calm.
• Think back over the call. Write down any personal information you may have inadvertently shared.
• Report the scam. Contact the Federal Trade Commission at ReportFraud.ftc.gov. You may also want to report the incident to your state's attorney general or your local consumer protection agency.
• Share your knowledge. Talk with family, friends, and neighbors about your experience so they know what to look out for.

When you receive a digital message, no matter how official it seems, do not click on any links. Do not give or confirm any personal information, including your name, birth date, phone number, address, email address, place of birth, driver's license, passport, or Social Security numbers, bank or other account numbers, and PIN numbers.

Being skeptical can keep you safe. Remove yourself from the situation. Do not share information. If you feel anxious and need to confirm that it was a scam, contact the organization using a method provided on their official website.

IRS Shifts to Electronic Payments

On March 25, 2025, President Trump signed Executive Order 14247 — Modernizing Payments to and from America's Bank Account. The order requires all payments made from or to the IRS to be conducted via electronic funds transfer (EFT).

The purpose of the Executive Order is to combat unnecessary costs, delays, risk of fraud, lost payments, theft and inefficiencies. For Fiscal year 2024 issuing paper checks was estimated to cost taxpayers more than $657 million.

The phaseout of paper check disbursements and receipts is scheduled for Sept. 30, 2025. Payments such as fees, fines, loans and taxes must be made electronically where permissible under existing law.

A few exceptions will remain at the discretion of the Treasury secretary:

1. Individuals without access to banking services or electronic payment systems;
2. Emergency payments where electronic disbursement would cause undue hardship;
3. National security- or law enforcement activities where non-EFT transactions are necessary or preferred;
4. Other circumstances as deemed necessary by the secretary.

Heads of federal agencies must submit implementation plans within 90 days of the order. Treasury Secretary Scott Bessent has 180 days to submit an implementation report detailing progress under the order.

Taxpayers should prepare for the shift to electronic payments ahead of the Oct. 15 filing deadline.

Did you Know? This Week in History

September 17, 1976: NASA Unveils its First Space Shuttle, the Enterprise

On September 17, 1976, NASA publicly unveiled its first space shuttle, the Enterprise, during a ceremony in Palmdale, California. Development of the aircraft-like spacecraft cost almost $10 billion and took nearly a decade. In 1977, the Enterprise became the first space shuttle to fly freely when it was lifted to a height of 25,000 feet by a Boeing 747 airplane and then released, gliding back to Edwards Air Force Base on its own accord.

Regular flights of the space shuttle began on April 12, 1981, with the launching of Columbia from Cape Canaveral, Florida. Launched by two solid-rocket boosters and an external tank, only the aircraft-like shuttle entered orbit around Earth. When the two-day mission was completed, the shuttle fired engines to reduce speed and, after descending through the atmosphere, landed like a glider at California's Edwards Air Force Base.

Early shuttles took satellite equipment into space and carried out various scientific experiments. On January 28, 1986, NASA and the space shuttle program suffered a major setback when the Challenger exploded 74 seconds after takeoff and all seven people aboard were killed.

In September 1988, space shuttle flights resumed with the successful launching of the Discovery. Since then, the space shuttle has carried out numerous important missions, such as the repair and maintenance of the Hubble Space Telescope and the construction and manning of the International Space Station. A tragedy in space again rocked the nation on February 1, 2003, when Columbia, on its 28th mission, disintegrated during re-entry of the earth's atmosphere. All seven astronauts aboard were killed. In the aftermath, the space-shuttle program was grounded until Discovery returned to space in July 2005, amid concerns that the problems that had downed Columbia had not yet been fully solved. NASA's final space shuttle mission came to an end in July 2011.

Weekly Focus

“Like so many members of the Baby Boom generation, I started out as a baby."

Dave Barry, American Author

"I can't change the direction of the wind, but I can adjust my sails to always reach my destination.”

Jimmy Dean, American Singer