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Markets entered September with investors focused on the labor market, inflation, and what those numbers could mean for Federal Reserve policy. August unemployment held at 4.1%, a level that remains historically low and below where unemployment has been roughly 88% of the time over the past 50 years. Nonfarm payrolls increased by 162,000, providing further evidence that the economy continues to create jobs. Yet beneath those encouraging headline numbers, there are signs that the labor market may not feel nearly as strong to American workers.
One of the most important numbers this week was wage growth, with average hourly earnings increasing just 3.1% over the past year. That represents the weakest pace of wage growth in more than five years, even with unemployment sitting at only 4.1%. Normally, a tight labor market gives workers greater bargaining power because employers must compete for available talent. The slowdown in wages suggests that the balance between employers and employees may be changing even before we see a significant increase in unemployment.
Consumer surveys reinforce that message because more Americans are reporting that jobs are becoming harder to find. Historically, perceptions about whether jobs are "plentiful" or "hard to get" have moved relatively closely with the unemployment rate, but that relationship has recently diverged. Workers may still have jobs, but they appear less confident that another opportunity would be readily available if they decided to leave. That declining confidence can reduce wage demands, slow job switching, and ultimately help moderate inflationary pressures.
For the Federal Reserve, this distinction matters because wage growth is one of several factors that can contribute to persistent inflation. Slower wage growth suggests the labor market currently may not be creating the type of significant inflationary pressure that would require policymakers to react aggressively. Unless upcoming inflation reports surprise materially to the upside, the current data support the possibility of the Fed remaining on hold in September. This week's Consumer Price Index, Producer Price Index, and consumer sentiment data should therefore give investors additional information about whether inflation continues moving in the right direction.
Markets Continue to Move Higher
Despite questions surrounding the labor market, U.S. equities generally held their ground last week, with the S&P 500 gaining 0.13% and closing at 7,719. The NASDAQ gained 0.42%, while the Russell 2000 added 0.15%, demonstrating relatively broad resilience across the market. Growth stocks led value stocks for the week, with the Russell 1000 Growth Index gaining 0.56% compared with a 0.27% decline for the Russell 1000 Value Index. International markets were mixed, with emerging markets gaining 0.26% while the MSCI EAFE Index declined 0.16%.
The longer-term numbers provide more perspective than any individual trading week, with the S&P 500 now up 13.65% year to date and approximately 20.11% over the past year. Small-cap stocks have been particularly strong this year, with the Russell 2000 gaining 20.83% year to date, while the Russell 1000 Value Index has risen 23.50%. Emerging markets have also delivered strong results, gaining 24.88% year to date, compared with 14.52% for developed international markets. These numbers are another reminder that leadership can rotate and that diversification can matter even when the largest U.S. companies receive most of the headlines.
Sector performance tells a similar story, with Consumer Discretionary up 44.5% year to date, making it the strongest-performing S&P 500 sector in the data this week. Communication Services followed at 23.9%, while Utilities, Financials, and Consumer Staples have each produced double-digit gains. Technology, despite attracting enormous attention from investors, was up a comparatively modest 1.4% year to date, while Energy was down 1.3%. Markets rarely move in a perfectly straight line, and yesterday's winner is not guaranteed to remain tomorrow's leader.
Interest Rates Remain an Important Part of the Story
Bond markets continue to reflect uncertainty surrounding inflation, economic growth, and future Federal Reserve policy. The 10-year U.S. Treasury yield finished at 4.78%, up from 4.73% the previous week and 4.44% at the end of June. The 2-year Treasury stood at 4.37%, while the 30-year Treasury reached 5.24%, keeping borrowing costs elevated across much of the economy. The average 30-year fixed mortgage rate was approximately 6.76%, continuing to create affordability challenges for prospective homebuyers.
Higher yields are not automatically bad news because they can also create opportunities for investors seeking income from high-quality fixed-income investments. At the same time, changing interest rates can affect bond prices, equity valuations, mortgages, business borrowing, and retirement-income decisions. This is why we believe investment decisions should be considered within the context of the entire financial plan rather than treating stocks, bonds, and cash as separate conversations. A portfolio should have a purpose beyond simply trying to predict what the Federal Reserve will do at its next meeting.
Commodities are providing another interesting signal, with WTI crude oil at $91.50 per barrel, compared with $57.26 at the end of 2025. Gold stood at $4,415, compared with $4,368 at year-end and $3,546 one year ago, while copper reached 14,371 compared with 12,504 at the end of 2025. Commodity prices can move for many reasons, including global demand, supply constraints, currencies, geopolitical developments, and investor expectations about inflation. Their recent movement reinforces why investors should look at several economic indicators rather than attempting to draw conclusions from a single data point.
Perspective Matters More Than Predictions
The Stoic philosopher Epictetus taught that some things are within our control and others are not, a distinction that translates remarkably well to investing. Investors cannot control tomorrow's CPI report, the Federal Reserve's next decision, Treasury yields, oil prices, or which sector leads the market next month. What we can control is how much risk we take, how diversified we are, how much liquidity we maintain, and whether our investment strategy remains aligned with our financial goals. Successful planning is less about predicting every market turn and more about preparing for a range of possible outcomes.
That perspective is particularly useful when economic signals appear to contradict one another, as they do today. Unemployment remains historically low, but workers are becoming less confident about job availability; stocks remain near strong levels, but interest rates are elevated; and wage pressures are easing while several commodity prices have increased substantially. None of those developments independently tells us exactly what comes next, and trying to force every data point into a simple bullish or bearish narrative can lead to poor decisions. The better question is whether your financial plan is prepared to function through multiple economic environments.
For retirees and investors approaching retirement, that means thinking beyond the performance of the S&P 500. Income needs, taxes, Social Security, insurance, estate planning, cash reserves, investment allocation, and withdrawal strategy all interact with one another. A strong market can create opportunities for rebalancing or tax planning, while higher interest rates may create opportunities for income-oriented investors. The objective isn't simply to accumulate more assets—it is to make those assets support the life and financial goals they were intended to fund.
What We're Watching This Week
This week's CPI and PPI reports will provide the next major test of whether inflationary pressures are continuing to moderate. Consumer sentiment will also be important because household confidence can influence spending, hiring expectations, and broader economic activity. Combined with the recent labor data, these reports should give investors and the Federal Reserve a clearer picture of the economy heading into the fall. We will continue watching the data while keeping short-term economic developments in the context of long-term financial planning.
Markets will always provide investors with something to worry about and something to become excited about, often at exactly the same time. The discipline is recognizing that neither fear nor enthusiasm should be allowed to replace a thoughtful financial strategy. We cannot control what markets do next, but we can control how prepared we are for what comes next. That is ultimately where sound financial planning earns its value.
Mission Financial Planners, LLC
Retirement Income Planning | Investment Management | Insurance Planning | Tax Efficiency | Estate Planning
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