The State of Markets: “Small & Mid-Caps Back in Focus”
On Wednesday the Fed resumed its rate cutting cycle, with its first cut since December last year. With that, US equities have performed well, rallying earlier in the week ahead of the announcement – before making new highs yesterday. In other words, equities have so far looked through the weakness in the economy (labour market), and appear supported by the outlook for looser Fed policy.
Of note, small and mid-caps are back in focus (e.g. the S&P600 and S&P400). This segment of the market is typically more interest rate sensitive (vs. large caps) and has significantly underperformed in recent years. As rate expectations have moved lower this summer, though, they’ve started to come back to life. The Russell 2000, for example, has made new record highs this week (just), and has outperformed the S&P500 (see key chart below).
For detailed analysis of key market themes, and the potential for sector & style rotation in US/global markets – please see details of our upcoming webinar (invitation in ‘Longview on Friday’ email attached).
Next week’s US macro data has a strong housing theme, with the release of new home sales, housing starts, and building permits (all on Wednesday); followed by existing home sales on Thursday. Other key data includes flash September S&P manufacturing and service sector PMIs (Tuesday), durable goods orders (Thursday) and personal income and spending (with PCE inflation) data on Friday. As is normal following a Fed decision, several Fed officials are scheduled to speak next week, including Chair Powell on Tuesday. Elsewhere it’s ‘PMI week’ in the rest of the world (mostly on Tuesday and Wednesday) and there’s a PBoC policy decision due on Monday. Please see below for a full list of key macro data and events.
Key chart: Russell 2000 relative to S&P500 (ratio of indices)
Upcoming Important Data/Events This Week:
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Events: |
Speech by the Fed’s Powell on economic outlook (Tues, 5:35pm); PBOC policy decision (Mon, 2am). |
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Monday: |
N/A |
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Tuesday: |
HCOB manufacturing & service sector PMIs for France (8:15am), Germany (8:30am) & Eurozone (9am) – all September first estimates. |
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Wednesday: |
Japanese S&P Global manufacturing & services sector PMI (September first estimate, 1:30am). |
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Thursday: |
US durable goods orders (August first estimate, 1:30pm); US existing home sales (Aug, 3pm). |
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Friday: |
US personal income & spending including headline & core PCE (Aug, 1:30pm). |
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Key earnings: |
N/A |
Key Research
US Quarterly Asset Allocation Update No. 63, 19th September 2025:
“Boom or Bust? A.k.a. Are we near the end or the beginning of the ‘Winner’s Curse’ phase of the 18 year land cycle?”
“It’s not incredibly obvious what Fed should do now”; “officials’ diverse views unsurprising given complicated policy backdrop”; “job market indicators suggest meaningful downside risk”
Source: Chair Powell, Fed Press Conference, 17th September 2025
The bifurcated debate about the outlook for the US economy continues and was fully on show in this week’s FOMC decision. One FOMC committee member believes a hike is the right course of action (for the remainder of 2025); another believes that this week’s decision should have been a 50bps cut (Miran no doubt); while most expect some further loosening. From a hike through to a number of cuts is a wide diversity of opinion for a committee which rarely has dissenters. The mood was neatly captured in Powell’s remarks – see quotes above.
Key North American Macro Data & Events:
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Events: |
Speeches by the Fed’s Williams on monetary policy panel (Mon, 2:45pm), Musalem on economic outlook (Mon, 3pm), Hammack on reserve banks and the economy (Mon, 5pm), Barkin at Howard Co Chamber (Mon, 5pm), Miran at the economic club of New York (Mon, 5pm), Bowman on economic outlook (Tues, 2pm), Bostic in a live podcast (Tues, 3pm), Powell on economic outlook (Tues, 5:35pm), Daly on monetary policy (Wed, 9:10pm), Goolsbee on trends for West Michigan (Thurs, 1:20pm), Williams at US Dollar Conference (Thurs, 2pm), Bowman in a moderated discussion (Thurs, 3pm), Barr on bank stress testing (Thurs, 6pm), Logan on a panel (Thurs, 6:40pm), Daly in a conversation with Mark Packard (Thurs, 8:30pm), Barkin at the PIIE (Fri, 2pm) & Bowman on monetary policy (Fri, 6pm). |
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Monday: |
Chicago Fed national activity (Aug, 1:30pm). |
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Tuesday: |
US Philadelphia Fed service sector activity (Sept, 1:30pm); US S&P manufacturing & service sector PMIs (September first estimates, 2:45pm); US Richmond Fed manufacturing & services index (Sept, 3pm). |
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Wednesday: |
US new home sales (Aug, 3pm); US housing starts & building permits (Aug, 1:30pm). |
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Thursday: |
US trade balance, exports & imports (Aug, 1:30pm); US wholesale & retail sales & inventories (Aug, 1:30pm); US GDP, including corporate profits (Q2 third estimate, 1:30pm); US weekly jobless claims (1:30pm); US durable goods orders (August first estimate, 1:30pm); US existing home sales (Aug, 3pm); US Kansas City Fed manufacturing sector activity (Sept, 4pm). |
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Friday: |
US personal income & spending including headline & core PCE (Aug, 1:30pm); Canadian GDP (July, 1:30pm); US Michigan Sentiment (September final estimate, 3pm); US Kansas City Fed service sector activity (Sept, 4pm). |
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Key earnings: |
Micron, AutoZone (Tues); Cintas (Wed); Costco, Accenture (Thurs). |
Fig B: US S&P manufacturing and service sector PMIs
Key European Macro Data & Events
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Events: |
Riksbank policy decision (Tues, 8:30am); speeches by the ECB’s Lane (Mon, 2:45pm), Nagel in Frankfurt (Mon, 5pm), Muller in Tallinn (Tues, 9am), Kocher (Tues, 2:40pm) & Cipollone in Frankfurt (Tues, 3:25pm); ECB publishes their economic bulletin (Thurs, 9am). |
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Monday: |
Eurozone consumer confidence (September first estimate, 3pm). |
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Tuesday: |
HCOB manufacturing & service sector PMIs for France (8:15am), Germany (8:30am) & Eurozone (9am) – all September first estimates. |
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Wednesday: |
Spanish PPI (Aug, 8am); German IFO business climate (Sept, 9am). |
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Thursday: |
Eurozone new car sales (Aug, 5am); German GfK consumer confidence (Oct, 7am); French consumer confidence (Sept, 7:45am); Spanish home sales & mortgage approvals (July, 8am); Eurozone M3 money supply (Aug, 9am). |
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Friday: |
Spanish GDP (Q2 final estimate, 8am); Italian ISTAT consumer & manufacturing confidence (Sept, 9am); ECB 1 & 3 year CPI expectations (Aug, 9am). |
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Key earnings: |
N/A |
Fig C: Eurozone consumer confidence (index)
Key UK Macro Data & Events
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Events: |
Speeches by the Bank of England’s Pill (Mon, 1:30), Bailey (Mon, 7pm) & Greene (Wed, 5:30pm). |
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Monday: |
N/A |
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Tuesday: |
S&P service & manufacturing sector PMI (September first estimate, 9:30am); CBI distributive trade survey (Sept, 11am). |
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Wednesday: |
N/A |
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Thursday: |
New car registrations (Aug, 5am); CBI distributive trade survey (Sept, 11am). |
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Friday: |
N/A |
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Key earnings: |
N/A |
Fig D: UK S&P manufacturing & service sector PMIs
Key Asia-Pacific Macro Data & Events
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Events: |
PBOC policy decision (Mon, 2am); testimony by the RBA’s Bullock (Mon, 2am). |
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Monday: |
N/A |
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Tuesday: |
Australian S&P Global manufacturing & services sector PMI (September first estimate, 12am). |
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Wednesday: |
Japanese S&P Global manufacturing & services sector PMI (September first estimate, 1:30am); Australian CPI (Aug, 2:30am); Japanese machine tool orders (August final estimate, 7am). |
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Thursday: |
N/A |
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Friday: |
N/A |
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Key earnings: |
N/A |
Fig E: Australian headline & (trimmed mean) core CPI (Y-o-Y %)
This Week:
Longview on Friday, 19th September 2025:
“Longview Strategic Asset Allocation Macro Updates”
US Quarterly Asset Allocation Update No. 63, 19th September 2025
“Boom or Bust? A.k.a. Are we near the end or the beginning of the ‘Winner’s Curse’ phase of the 18 year land cycle?”
China Quarterly Asset Allocation Update No. 63, 15th September 2025
“China: Sugar Rush Now, Slowdown Later A.k.a. Navigating China’s Growth Path”
Daily Dose of Macro & Markets:
Daily Dose of Macro & Markets 18th September 2025:
“Fed Meeting Outcome & Gold”
Daily Dose of Macro & Markets 17th September 2025:
“How Frothy Are Markets?”
Daily Dose of Macro & Markets 16th September 2025:
“China: More Stimulus -> More Equity Upside”
Weekly Risk Appetite Gauge:
'Weekly Risk Appetite Gauge', 15th September 2025:
“Buy the Rumour, Sell the Fact”
Last Week:
Longview on Friday, 12th September 2025:
“US Bond Breakout -> Soft Landing or Recession Signal?”
Global Valuation Chartbook No. 63, 11th September 2025:
“US Valuations: Testing The Limits”
Monthly Global Asset Allocation No. 70, 9th September 2025:
“US Treasuries: Increase OW in Strategic Portfolio A.k.a Judging the Yield Lows”
Daily Dose of Macro & Markets:
Daily Dose of Macro & Markets 11th September 2025:
Daily Dose of Macro & Markets 10th September 2025:
Daily Dose of Macro & Markets 9th September 2025:
“All Eyes on QCEW (i.e. US Payroll Revisions)”
Weekly Risk Appetite Gauge:
'Weekly Risk Appetite Gauge', 8th September 2025:
“Consolidating or Rolling Over?”