Weekly Market Insights 08/25/2025

Market Recap:

Markets Rebound on

Fed Chair Powell’s Comments

Stocks had a bumpy start to the week, as investors kept a close eye on global events and some profit-taking in big tech names. Hopes for progress in peace talks between Russia and Ukraine, and cautious comments from Fed officials about keeping interest rates high, made investors uneasy. As a result, the S&P 500 stayed under pressure through midweek.

Things turned around on Friday after Federal Reserve Chair Jerome Powell spoke at the Jackson Hole meeting. He said the Fed may be open to cutting interest rates in September, noting that slowing job growth is now a bigger concern than inflation. That shift in tone sparked a strong rally across the market. The S&P 500 jumped more than 1.5% on Friday and finished the week slightly higher, while small cap stocks soared nearly 4% to new highs for the year. Commodities also joined the rally, with oil and gold both gaining for the week, while bond yields pulled back as investors bet on a rate cut.

Looking ahead, Powell’s comments gave the market a short-term boost, but the bigger picture hasn’t changed much. Inflation is still running hotter than the Fed would like, and the job market is showing some signs of slowing. For now, the setup remains positive with steady (yet slow) economic growth, the Fed seemingly beginning to lean supportive, and momentum currently providing a bullish tailwind for stocks, but we’re also watching risks closely. If inflation stays high while growth slows, i.e. “stagflation”, that could be a problem down the road.

Source: Stockcharts.com

On Deck this week: Inflation and the Consumer

The economic calendar is busy this week, with a few key reports that could move markets. On Wednesday, July new home sales will give a fresh look at the housing market, a key gauge of consumer demand. Thursday brings the weekly jobless claims report, which is becoming borderline concerning given the recent rises and revisions. Then Friday is the big day, with the release of the Fed’s preferred inflation measure, Core PCE.

Alongside the economic data, several major retailers are set to report earnings. These updates will offer further insights into how retailers are handling higher costs and shifting consumer behavior.

With both economic reports and company retail earnings on deck, investors can expect plenty of market-moving headlines. Together, these reports will shape how confident investors feel about growth, inflation, and the Fed’s next steps as we head into September.

Broad Overview: Optimistically Attentive

So far this summer, markets have shown remarkable resilience, reaching record highs as steady consumer spending, solid corporate earnings, and growing expectations for potential Fed rate cuts supported sentiment. Large-cap stocks, particularly in technology and AI, led the way, while international markets benefited from easing inflation and a softer U.S. dollar. It’s an encouraging backdrop, but looking closer, the picture is a little more nuanced.

Inflation appears “sticky” while tariff costs may have just shown up in the recent producer prices report. Hiring is slowing down and unemployment is on the rise with modest GDP growth this year. These factors are likely the reason consumer confidence has leveled off. This mix of slower growth and persistent inflation is why the Fed remains cautious, waiting for more data before committing to rate changes. Meanwhile, trade tensions and geopolitical uncertainty continue to exacerbate the whole issue.

Despite the challenges, the stock market continues to carve out new highs and the rally appears to be spilling over to sectors other than technology that have been left behind. A broadening rally is a powerful force that historically tends to move further than most believe possible.

As investors, it’s important to be aligned with the market’s trend while gathering clues from economic data and corporate signals to adapt should conditions shift. We will continue to gather data and report our findings in these missives, but should you have any questions regarding your current strategy or the markets in general, please reach out to your CIAS Investment Adviser Representative.