Commentary:
U.S. stocks marched higher in September, with the S&P 500 posting its fifth consecutive monthly gain. The economy remained resilient, supported by a healthy consumer and increased clarity around trade and economic policy. The Russell 2000 eclipsed its November 2021 record high as the Fed began its rate-cutting cycle. Historically, rate-cutting cycles have provided a bullish backdrop for equities. According to JPMorgan, the Fed has cut rates with equity markets within 1% of record highs 16 times in history, and those periods were followed by an average gain of nearly 15% over the subsequent year.
In September, tariffs moved back into focus. Late in the month, the Trump administration announced new sector-specific tariffs on pharmaceuticals, heavy trucks, select furniture, and foreign-made films, while also considering measures aimed at foreign semiconductor producers. Earlier, a federal appeals court ruled that most of Trump’s tariffs are illegal, though the case has been appealed to the Supreme Court, with a decision expected in early November.
The Federal Reserve cut interest rates by 25 bps at its September meeting, and markets anticipate an additional 50 bps of cuts before year-end. The Fed noted that recent indicators suggest economic growth moderated in the first half of the year. Job gains have slowed, and while the unemployment rate has edged higher, it remains low by historical standards. Chair Powell signaled a cautious approach to further cuts despite continued pressure from the Trump administration to ease policy more aggressively. The next FOMC meeting is October 28-29.
Small- and mid-sized companies continue to trade at historically wide valuation discounts relative to their large-cap counterparts. Structural factors such as increased M&A activity, reshoring, insulation from multinational dynamics, declining interest rates, shifts in corporate tax policy and deregulation create a compelling landscape for smaller capitalization companies.
The valuation of the Russell 2000 Value remains compelling, currently trading at ~14x estimated earnings for the next twelve months versus ~25x for the S&P 500. This attractive valuation differential underscores the importance of valuations as a strong determinant of long-term performance.
September 2025 Performance
| (September 30, 2025) | Growth | Core | Value |
| Russell 1000 (Large Cap) | 5.3% | 3.5% | 1.5% |
| ” 3000 (All Cap) | 5.1 | 3.5 | 1.5 |
| ” 2000 (Small Cap) | 4.2 | 3.1 | 2.0 |
As value-oriented stock pickers, we find the current market conditions exceptionally favorable for our methodology. Our focus remains steadfast on identifying exceptional businesses trading at a discount to Private Market Value, with catalysts to surface value. We will continue to use the volatility provided by Mr. Market to increase our stakes in great companies at attractive prices.
Kevin V. Dreyer Christopher J. Marangi
