Avalon Weekly Playbook
Week of September 15, 2025
Summary
With U.S. equities entering the week at record highs, attention now turns to catalysts that could shape performance in the near term. The September FOMC meeting will dominate headlines, but a series of macro data releases and sector-specific developments will provide further insight into the balance between growth risks and policy expectations. For institutional allocators, this week presents both opportunities and elevated volatility risk.
Macro Data Releases
CPI and Core CPI (Tuesday): Inflation remains the most important data point ahead of the Fed meeting. Consensus expects a modest month-over-month increase, with core readings watched closely for signs of shelter and wage stickiness.
Retail Sales (Wednesday): Consumer resilience has underpinned growth throughout 2025. Any slowdown in discretionary categories could reinforce concerns that higher rates are beginning to curb demand.
Jobless Claims (Thursday): Weekly filings have been drifting higher. A sharper increase would add to labor market deterioration concerns already reflected in last week’s weak payrolls.
Housing Starts and Permits (Friday): A leading indicator for construction activity and rate-sensitive sectors. Data will help assess how higher mortgage costs have fed into the real economy.
Federal Reserve Meeting
Decision (Wednesday, September 17): Markets are pricing in a 25 bps cut, with a non-negligible probability of 50 bps. The cut itself may be less important than the accompanying guidance.
Forward Guidance: Investors will focus on whether the Fed frames this as the beginning of a sustained easing cycle or as a precautionary adjustment. The updated Summary of Economic Projections and dot plot will provide additional clarity.
Press Conference: Language around inflation risks and labor market slack will be scrutinized for signals of future policy path.
Sector Themes to Monitor
Technology & AI: Valuations remain elevated, and leadership is vulnerable to any signs of policy disappointment or growth downgrades.
Financials: Rate-sensitive bank and insurance equities may lag further if the Fed signals a deeper easing cycle.
Real Estate & Utilities: These yield-sensitive sectors could attract renewed flows if bond yields fall further.
Consumer Discretionary: Retail sales and credit card data will provide important insights into household balance sheet health.
Fund Flows & Positioning
Last week’s significant equity outflows and bond inflows suggest investors are hedging exposure despite strong index performance. This week’s policy event risk may extend that dynamic, with volatility likely to rise around the FOMC announcement.
Risks to Watch
Policy Disappointment: If the Fed cuts only 25 bps without dovish guidance, markets could stage a “sell the news” reversal.
Inflation Surprise: A stronger-than-expected CPI print early in the week could complicate the Fed’s messaging.
Global Macro: Ongoing trade frictions and currency volatility remain a secondary but meaningful risk backdrop.
Conclusion
This week represents a critical juncture for markets, with the September FOMC meeting anchoring both risk sentiment and forward guidance into Q4. Allocators should prepare for elevated volatility, balancing growth exposure with protective strategies while keeping a close eye on inflation, labor market, and consumer demand data. The interplay between policy action and macro fundamentals will dictate whether equities can extend gains or face a short-term consolidation.
