August 24, 2025
Volume 12, Issue 35
Weekly Recap
The S&P 500 rallied on Friday and ended last week modestly higher after losing ground for the previous four days. Federal Reserve Chair Jerome Powell’s prepared remarks on Friday morning at a symposium in Jackson Hole, Wyoming, appeared to open the door to rate cuts, lifting investor sentiment, even though the basis for easing was growing economic weakness. Within the index, the energy, real estate, financials, and materials sectors posted the biggest gains. Large-cap value stocks outperformed their growth counterparts, which lost ground. The S&P Mid-Cap 400 and the small-cap Russell 2000 posted strong returns. However, the tech-heavy Nasdaq Composite finished the week lower, reflecting profit-taking amid reemerging concerns about the sustainability of massive spending on infrastructure related to artificial intelligence.
U.S. Treasury securities had largely generated flat returns heading into Friday morning. Thereafter, the Fed chairman’s comments on monetary policy and employment sparked a rally, pushing down yields.
More specifically, Mr. Powell acknowledged the difficulties posed by inflationary pressures and emerging weakness in the labor market in pursuing the central bank’s dual mandate of controlling inflation and maximizing employment. However, he asserted that the balance of risk appears to be shifting in ways that “may warrant adjusting [the central bank’s] policy stance.” Rates, in his view, are at restrictive levels. Meanwhile, the Fed chair opined that the unusual combination of weak labor demand and declining labor supply due to the drop in immigration “suggests that downside risks to employment are rising.”
An early reading of the S&P Global U.S. Purchasing Managers Index indicated that business activity in August grew at the fastest pace so far this year. The composite PMI, which covers the services and manufacturing sectors, surprised to the upside at 55.4. It also marked the 31st consecutive month where the composite PMI came in above 50, the level that demarcates an expansion.
The services sector PMI moderated from the 55.7 registered in July, coming in at 55.4. Manufacturing PMI, on the other hand, hit a 39-month high of 53.3, outstripping a FactSet consensus estimate that had called for this indicator to remain in contractionary territory. Expectations for rising demand and efforts to build inventories amid fears of supply shortages and higher prices contributed to an upside surprise in manufacturing output. However, companies in the manufacturing and services sectors collectively reported the steepest increase in input prices since May. Tariffs were cited as a key driver of higher costs. Companies passed through these costs to customers, with average prices charged for goods and services increasing at the fastest rate since August 2022. The latest employment data raised concerns about the labor market. New applications for unemployment benefits increased to 235,000 in the week ended August 16, an uptick of 11,000 relative to the preceding seven-day period. A Bloomberg survey of economists had shown a median forecast of 225,000 initial jobless claims. Continuing unemployment claims came in at 1.972 million in the week ended August 9, an increase from the downwardly revised 1.942 million registered the week before.
Market Monitor
A full listing of market performance data is available here.
DQYDJ.com (“Don’t Quit Your Day Job”) offers helpful investment calculators here, including one that shows total returns for individual stocks. Koyfin.com provides reams of data on individual stocks, including the ability to track total return — and just about anything else — over time.
In the News
Federal Reserve Chair Jerome Powell opened the door for rate cuts next month when he said the labor market might be softening enough to rein in inflation that is being pushed up by tariffs. Throughout the year, Mr. Powell and his colleagues have held rates steady, pointing to a solid labor market and uncertainty over the inflation outlook given large tariff hikes. But Mr. Powell suggested the outlook was changing in a direction that could justify a resumption of rate cuts in a widely watched address at a conference in Wyoming on Friday. The speech came amid immense pressure from U.S. President Donald Trump, who on Wednesday called for Federal Reserve governor Lisa Cook to resign based on accusations of mortgage fraud. On Thursday, Justice Department official Ed Martin encouraged Mr. Powell encouraged Mr. Powell to remove Cook from her position despite the Fed chair lacking the legal authority to do so.
The Federal Reserve is poised to lower interest rates in September. But signs of stickier inflation could limit how much relief officials can ultimately provide to borrowers.
To the casual observer, the rally in the stock market may seem baffling. But corporate profits remain strong, and the economy, despite worries about what’s to come, is still solid. There are pockets of weakness, but the biggest companies that drive the S&P 500’s performance have been largely insulated against further impact from tariffs, propelled instead by the growth of artificial intelligence. The bond market seems to agree. Investment-grade corporate credit spreads are at their tightest levels compared to U.S. Treasury securities since 1998 and have gotten tighter throughout 2025. Investment-grade spreads spiked to around 118 basis points in the aggregate after the so-called Liberation Day on April 2, but have contracted to around 75 basis points since then. The high-yield bond index bolted up to an average yield of 8.5 percent after Liberation Day but is back to an average yield of 6.7 percent.
In a joint statement released on Thursday, the European Union and the United States revealed the terms of the trade deal agreed upon last month, with the 27.5 percent tariff on cars made in Europe remaining in place until the 27 member states of the European Union lower their duties on U.S. agricultural and industrial goods. Most other European goods will be subject to a 15 percent tax upon entering the country.
Tariffs are getting results, some of them bad. Three experts weigh in here.
Cardboard box sales: a concerning leading indicator. Cracker Barrel lost almost $100 million in value after a new logo release.
Charts of the Week
I found the following articles to be of note. Some may be of interest only to advisors while others are aimed more broadly. You may hit paywalls below; many can be overcome here.
- Rebuffed: An Empirical Review of Buffer Funds (AQR)
- America’s Five Wealth Classes (Venessa Wong)
- Turn, Turn, Turn (Jesse Cramer)
This is the best thing I’ve read recently. The loveliest. The saddest. The most sensible. The most obvious. The most powerful. NFL: They’d do it again. Pitching is dangerous for kids. The number. Pickleball. Evansville. Better search. Tolkien against the grain.
Life expectancy at birth was 18 years in the early Bronze Age, 22 in the Roman Empire, and 36 in Massachusetts in 1776. In 1976, it was 73 years. Today, it’s 78.4 years; globally, Japan leads the way with a life expectancy at birth of 84 years.
“Winter is an etching, spring is a watercolor, summer is an oil painting, and autumn is a mosaic of them all.”
~ Stanley Horowitz
Securities and advisory services are offered through Madison Avenue Securities, LLC, a member of FINRA and SIPC, a registered investment advisor This report provides general information only and is based upon current public information we consider reliable. Neither the information nor any opinion expressed constitutes an offer or an invitation to make an offer, to buy or sell any securities or other investment or any options, futures, or derivatives related to such securities or investments. It is not intended to provide personal investment advice and it does not take into account the specific investment objectives, financial situation, and the particular needs of any specific person who may receive this report. Investors should seek financial advice regarding the appropriateness of investing in any securities, other investment, or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. Investors should note that income from such securities or other investments, if any, may fluctuate and that price or value of such securities and investments may rise or fall. Accordingly, investors may receive back less than originally invested. Past performance is not necessarily a guide to future performance. Diversification does not guaranty against loss in declining markets.
