Can you see the inflation?
Commentary:
Although September is typically a seasonally weak month for equities, we stayed true to our macro process, which now points decisively toward Quad 2 (growth and inflation accelerating into Q4) and remained constructive despite the negative media narrative. That discipline paid off: the S&P 500 advanced 3.5% for the month and almost 14% year-to-date, its best September in fifteen years [1] while inflation hedges from gold to small-caps sprinted ahead.
Inflation-sensitive assets stole the show. Gold pierced a record $3,900/oz after a 12% monthly surge, lifting its 2025 gain to roughly 48%. Silver’s rise has been even steeper, up about 55% year-to-date. Equity markets echoed that message: the high-beta Russell 2000 logged its first record close since 2021 on September 18th [2], and AI-heavy mega-caps propelled the Nasdaq to multiple all-time highs, finishing the month up 5.76%. In fixed income, core Treasuries rallied after the Fed’s pivot, but the Bloomberg Agg finished flat as credit spreads widened late-month.
Headline inflation is no longer retreating. August CPI printed a 2.9% year-over-year rate, ticking up towards 3% for the first time since January, with shelter and medical services supplying the heat. Core PCE told a similar story at 2.9%. [3] Even so, the Federal Reserve delivered its first rate cut of the cycle on 17 September, trimming the target range to 4.00–4.25% and projecting two more quarter-point moves by year-end.
Conclusion:
Our strategy continues to be process over narratives. August’s 3-2-1 formation, a sequential shift from Quad 3 (slowing growth, rising inflation) to an anticipated Quad 2 (accelerating growth and inflation) and, ultimately, Quad 1 (growth accelerating, inflation decelerating), drove our decision to overweight Gold, Silver, U.S. Small-Caps, and Mega-Cap Tech. Those allocations have already rewarded the portfolio and, in our view, remain well aligned with the road ahead.
As we enter Quad 2 this quarter, history suggests that real assets, cyclical equities, and high-cash-flow technology continue to lead on both absolute and risk-adjusted terms. Our current exposures are positioned to capture that upside while providing liquidity through the metals sleeve if volatility re-emerges. Looking one step further, the models signal a transition to Quad 1 early next year; here, the same small-cap and tech positions typically maintain momentum, while the metals offer optionality should the dollar weaken.
In short, the 3-2-1 roadmap shaped our August moves, and the portfolio now stands to benefit from both the pro-growth, pro-inflation bias of Quad 2 and the growth-led follow-through of Quad 1. We will continue to let the data guide sizing and risk controls, but for now the signals and the strategy are fully aligned.
Sources
3. https://www.bls.gov/news.release/archives/cpi_09112025.htm?utm
Model Performance Update
Our Moderate Model Portfolio returned 2.25% in September and has returned 11.67% Year-To-Date
Changes to the model portfolio in September
9/25/2025
- Added RSP (Equal Weight S&P) to Satellite 1
9/12/2025
- Added KRE (Regional Banking) and removed XLU (Utilities) from Satellite 1
9/25/2025
- Removed XLB (Materials) and added PINK (Healthcare) to Satellite 1
- Removed KRE (Regional Banking) and added to XLE (Energy) in Satellite 1
September Performance with Benchmark
YTD Performance with Benchmark
If you were to have any questions regarding the above please reach out to us to set up a one to one meeting to review your situation.
Sincerely,
Bryant Andrus, MSF, CFP®
President
SBC Investment Management
P: (602) 641-5996
M: (319) 520-2033
E: bandrus@sbcinvestmentmanagement.com
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