The current macroeconomic environment presents a compelling and complex picture for investors heading into the final quarter of 2025. A confluence of factors has given rise to a potential “Goldilocks” scenario. Chief among these are a newly dovish Federal Reserve, which lowered the Fed Funds rate by 25 basis points to 4.00%-4.25% on September 17th due to a softening and significantly downward-revised non-farm payroll numbers as well as a rising unemployment rate, alongside mixed but generally acceptable inflation, illustrated by the Core Gross Domestic Product Price Deflator (GDP) and U.S. Personal Consumption Expenditures Core Price Deflator (PCE) (charts below). This scenario describes an economy that is not too hot to fuel runaway inflation, nor too cold to trigger a recession, fostering a positive outlook for the U.S. economy and stock market.

These two charts illustrate the relationship between stock market performance and investor borrowing, but they do so from two different perspectives.
The above chart compares the level of the S&P 500 index (red line) with the total dollar amount of money investors have borrowed in their margin accounts (blue line). The key takeaway here is the strong positive correlation between the two. As the stock market rises, the amount of margin debt also tends to rise. Conversely, when the market falls, margin debt also falls. When stocks go up, investors feel more confident and are more willing to borrow money (use leverage) to buy more stocks, hoping to amplify their gains. Also, as their portfolios increase in value, their borrowing power increases.

A trio of charts analyzing market sentiment reveals a generally optimistic outlook from Wall Street analysts, with an expected median 12-month price target increase of nearly 12% across the board. However, this positive sentiment is not evenly distributed, with significant variations in both target price expectations and “Buy” recommendations across different sectors and industries.
The charts provided using Bloomberg data delve into analyst expectations, breaking them down by broad economic sectors and more specific industry groups. The data highlights areas of pronounced bullishness, particularly in the Energy and Information Technology sectors, while also pointing to more subdued expectations in others like Utilities and Financials.