by Jason Bodner
September 23, 2025
Did you know that bamboo can grow by more than three-feet in a single day? This astonishing growth rate makes bamboo one of the fastest growing plants on Earth. When conditions are right, entire forests can appear seemingly overnight – but it often takes five-years of underground growth before the first green-shoot emerges. In other words, the real growth happens under the surface before we see anything.
Markets can also surge with unexpected vigor, after a long base-building period.
Barring sudden geopolitical instability, the next three-months should be stellar for stocks, and we have already seen a typically weak-summer season instead being surprisingly strong.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
With one week left to go in September, we’ve seen five-straight months of rising stock markets in all four-major indexes (above), but for the previous 35-years, August and September have been the two-weakest months for equities. Since 1990, September has been positive less than half (48.6%) of the time. This matters because the final-quarter of the year is usually the strongest. October’s average returns are solid (a +1.3% average), December is better (+1.6%), and November posts the highest average-gains (at +3.2%).
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Heading into year-end, I feel well-positioned for what could be an outstanding finish.
The Fed’s Rate-Cut is an Added Gift
Last week, the Fed cut its target range short-term rate from a range of 4.25–4.50% to 4.00–4.25%. Most pundits expected a 25-basis-point cut, but the real juice came from the outlook for more cuts in October and November. Cuts usually are not a one-off event… they are part of a “cycle,” or long-term trend.
Inflation has steadied. The Consumer Price Index (CPI) ticked up in August, but the broader pattern remains down. Both the CPI and the Fed Funds effective rate are trending lower. Yet the spread between them remains elevated at 1.225 – still well above the 65-year average of 1.04. That gap can close two-ways – either inflation rises, or the Fed cuts further. With inflation stable, the odds favor the latter.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
It’s also worth remembering that the Fed’s 2% inflation target is a unicorn: The 65-year average CPI is 3.75%, so inflation under 3% is healthy. Falling rates and steady inflation are fertile ground for growth.
Earnings Strength Continues
In Q2, 81% of S&P 500 companies beat both sales and earnings expectations. That far exceeds historical averages. Looking ahead, analysts expect continued positive surprises, partly because corporate guidance has been cautious. Tariffs and trade concerns were expected to drag profits down, but the reality has been far less severe than most had feared. And as more reports roll in, the case for optimism becomes clearer.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Add fiscal policy, and the case strengthens. The “Big Beautiful Bill” promises lower taxes, directly improving margins. Combine that with cheaper financing, and profitability is set to expand.
Nearly $7.5-trillion sits in money market funds. Those accounts have earned handsome yields during the rate-hike cycle, but their allure fades as rates fall. Why accept shrinking yields when equities are rising?
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
This massive “wall of money” can fuel the next rally. As cash comes off the sidelines, it becomes rocket-fuel for stocks, so the question is not whether to be long equities, but which equities to own.
The answer starts with small-cap and mid-cap, the companies with the most ground to recover. They benefit disproportionately from falling-rates and lower-taxes. Smaller firms are more capital-sensitive than the giants. When borrowing costs fall and tax burdens ease, margins expand faster, fueling monster-growth.
Sector Leadership
Technology, Discretionary, and Industrials – the engines of every bull-market – are all in gear. Technology underpins nearly everything – products, services, healthcare, and infrastructure. Discretionary spending reflects true consumer strength, while Industrials signal expansion in construction and manufacturing.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Financials deserve equal attention. Falling rates loosen credit conditions, spurring more lending. Banks also benefit from renewed M&A activity, as companies seek expansion in friendlier monetary conditions.
REITs also stand to gain. With their legal requirement to distribute 70% to 90% of profits as dividends, they become an appealing alternative for yield-seeking investors when money market returns shrink.
Money Flows Confirm the Picture
Institutional flows support the bullish backdrop. The Big Money Index (BMI) continues to rise. It’s now at 76%. Overbought is defined as 80%, but history shows that being overbought is no red-flag. After the CoVID crash, the BMI remained overbought for 87-trading days, all while the major markets surged.
We are not there yet, and even if we cross the 80% threshold, that would likely signal persistent strength.
Equity flows remain positive. Outflows in August and early September were negligible. ETF inflows are climbing, reflecting broad participation. Elevated Trading Volumes confirm conviction, not hesitation.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
The sector breakdown is equally bullish. In September, the largest inflows have been into Technology, Financials, Healthcare, and Industrials. Healthcare, in particular, is interesting. Long left behind, it is finally lifting off six-month lows. The internal tug-of-war that kept it flat may be giving way to growth.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Within the sectors, most inflows are going into smaller companies. Since September 1st, 85% of inflows have gone into firms under $50-billion in market cap, with 39.3% in the $500-million to $5-billion range and 45.5% in $5-billion to $50-billion range. This indicates small-cap and mid-caps (not mega-caps) are leading the way.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Put it all together, and the setup is extraordinary. Rates are falling, taxes are easing, earnings are beating, and $7.5-trillion in cash is waiting to move. Sector leadership is in the right places. Institutional flows are overwhelmingly positive. Even seasonal headwinds have vanished. The market is not just strong, it’s accelerating into what could be one of the most bullish setups in decades.
Bamboo forests seem to appear overnight, but their growth is the result of deep roots and fertile conditions. Markets work the same way. This rally is not magic. It is the product of policy shifts, strong earnings, cash positioning and broad flows all working in harmony.
As Seneca reminds us: “Luck is what happens when preparation meets opportunity.” Investors prepared with facts, discipline, and optimism are poised to find not just luck, but lasting success.
Which side will you be on when this forest of opportunity takes shape?
All content above represents the opinion of Jason Bodner of Navellier & Associates, Inc.
Also In This Issue
A Look Ahead by Louis Navellier
The Case for More Interest Rate Cuts in 2025
Income Mail by Bryan Perry
Russell 2000 Delivers Broad-Based Rally Confirmation
Growth Mail by Gary Alexander
In Market Lingo, a “Fall” (Season) Means a Rise (in Stocks)
Global Mail by Ivan Martchev
We’re In “Thin-Air” Territory in the U.S. Stock Market
Sector Spotlight by Jason Bodner
Welcome to the “Bamboo” Market
View Full Archive
Read Past Issues Here
Jason Bodner
MARKETMAIL EDITOR FOR SECTOR SPOTLIGHT
Jason Bodner writes Sector Spotlight in the weekly Marketmail publication and has authored several white papers for the company. He is also Co-Founder of Macro Analytics for Professionals which produces proprietary equity accumulation and distribution research for its clients. Previously, Mr. Bodner served as Director of European Equity Derivatives for Cantor Fitzgerald Europe in London, then moved to the role of Head of Equity Derivatives North America for the same company in New York. He also served as S.V.P. Equity Derivatives for Jefferies, LLC. He received a B.S. in business administration in 1996, with honors, from Skidmore College as a member of the Periclean Honors Society. All content of “Sector Spotlight” represents the opinion of Jason Bodner
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