U.S. Economy Slows as Fed Eyes Rate Cut; Bitcoin Holds Appeal in Stagflation-Lite Era

Stratosphere Capital Partners – Market Commentary | September 2025

The U.S. economy is sending mixed signals this fall. Growth rebounded strongly in the second quarter (+3.3% annualized) after an early-year contraction, but momentum has cooled. August payrolls added just 22,000 jobs, and unemployment ticked up to 4.3%—the highest in nearly three years. A recent revision showed 911,000 fewer jobs were created through March than previously reported, underscoring a weaker labor market than many believed.

Inflation remains sticky. Consumer prices rose 2.7% year-over-year in July and are expected to edge closer to 2.9% when August data is released. The Federal Reserve has held rates steady at 4.25%–4.50% since January but is widely expected to cut by 25 basis points at its September meeting. Officials face a balancing act: easing too aggressively risks reigniting inflation, while standing pat risks further softening in the job market.

Credit conditions are tight but not frozen. Delinquencies on credit cards, auto loans, and student debt are rising, pressuring lower-income households. Corporate borrowers, however, continue to find financing through booming private credit markets, softening the risk of a systemic crunch.

Economists describe today’s landscape as “stagflation-lite”—not the runaway inflation and mass unemployment of the 1970s, but a mix of slow growth, sticky prices, and rising credit stress that erodes confidence.

For investors, this environment carries direct implications. Equities face headwinds from higher financing costs, while bonds offer limited real returns. Bitcoin, meanwhile, continues to attract interest as a hedge against both inflation and policy uncertainty. Its fixed supply and independence from central bank policy resonate with investors seeking diversification in an era where traditional assets struggle to preserve purchasing power.

Bottom Line for Clients: Expect modest Fed easing, slower job growth, and continued pressure on households through year-end. Stratosphere Capital is monitoring credit trends and positioning portfolios to capture opportunities in digital assets, where structural scarcity offers potential resilience in a stagflation-lite economy.