Weekly Market Update – August 22, 2025

Quick Takes

• Last week was a mostly sleepy and downside-biased week for stocks, until Friday morning’s speech from Federal Reserve Chairman Jerome Powell at the Fed’s annual symposium in Jackson Hole, Wyoming. Dovish comments by Powell immediately sparked stocks higher. 
• For the week, the S&P 500 was up +0.3%, the tech-heavy Nasdaq Composite Index was down -0.6%, and the small cap Russell 2000 Index jumped +3.3%. U.S. Treasury yields were down, and the Bloomberg U.S. Aggregate Bond Index returned +0.4% for the week.  
• Powell appeared to shift Fed policy stance to emphasize the downside risks to the labor market while continuing to acknowledge inflation pressures, but deemphasizing the potential impact of tariff policy. Fed funds futures are placing an 83% chance of a September rate cut.

Source: Bloomberg. Data as of August 22, 2025.
Price Returns for Equity, Total Returns for Bonds.
* The term basis points (bps) refers to a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 0.01%. Bond prices and bond yields are inversely related. As the price of a bond goes up, the yield decreases.

Fed preps for rate cuts as manufacturing and inflation picks up

Last week was a mostly sleepy and downside-biased week, but that all changed Friday morning. The S&P 500 Index was down modestly each day from Monday through Thursday, weighed down by sinking technology stocks and disappointing retail earnings. But stocks abruptly spiked higher following Friday morning’s long-awaited speech from Federal Reserve Chairman Jerome Powell at the Fed’s annual symposium in Jackson Hole, Wyoming. The market got what it has been waiting for from Powell as he delivered a clear signal of imminent interest rate cuts. “With policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance,” he said. For the day, the S&P 500 was up +1.5%, the technology-dominated Nasdaq Composite Index was up +1.9%, and the small cap Russell 2000 Index soared +3.9%. That was enough to put the S&P up +0.3% for the week and extend its winning streak to three weeks. The Russell 2000 gained +3.3% for the week to also mark three straight positive weeks. However, even with Friday’s gain, the Nasdaq couldn’t dig out of negative territory and finished the week down -0.6%.  

Markets definitively interpreted Powell’s comments as dovish, but technically, he did not fully commit to cutting interest rates. He did however, appear to shift Fed policy stance to emphasize the downside risks to the labor market while continuing to acknowledge inflation pressures, but deemphasizing the potential impact of tariff policy. That is indeed a more dovish stance than the meeting minutes from the Federal Open Markets Committee July meeting showed when they were released Wednesday afternoon. Those showed that a ‘few’ Fed officials perceived ‘stubbornly elevated inflation’ and believe inflation from new tariffs is just around the corner, which American consumers will bear the costs of. Fed funds futures are now pricing in an 83% chance of a quarter-point cut in September, up from 75% Thursday.

Beyond U.S. stocks, international equities were mixed. The MSCI EAFE Index (developed market non-U.S. stocks) was up +0.8% following the prior week’s +2.3% increase. Eurozone business activity rose for a third straight month as New Orders rebounded after 14 months of declines. In the U.K., business activity expanded the most since last August. In Japan though, stocks were down as inflation came in hot, increasing the odds that the Bank of Japan could raise interest rates again this year. Contrary to developed markets, the MSCI Emerging Markets Index slipped -0.5% following the prior week’s +1.5% gain, despite the fact that Chinese stocks were up.

U.S. Treasuries were largely sitting on flat returns heading into Friday morning. But Powell’s comments in Jackson Hole and worse-than-expected employment data sparked a rally in U.S. government bonds, pushing down yields. (Bond prices and yields move in opposite directions.) The benchmark 10-year U.S. Treasury note yield fell -6 basis points for the week, to end at 4.25%, while the 2-year Treasury yield slipped -5 basis points to 3.70%. With yields down, the Bloomberg U.S. Aggregate Bond Index returned +0.4% for the week. Non-U.S. bond returns were also little changed with the Bloomberg Global Aggregate ex U.S. Bond Index just barely negative at -0.04%.

Chart of the Week

The preliminary “flash” S&P Global U.S. Composite Purchasing Managers Index (PMI) showed economic activity perking up in August, rising to 55.4 from 55.1 the month before. That beat Wall Street expectations, which were for a dip to 53.5. Levels above 50 indicate economic expansion, while levels below 50 indicate contraction. The Manufacturing PMI rose to 53.3 from 49.8 the prior month, much better than expectations for it to slip to 49.7. Meanwhile, the Services PMI slipped to 55.4 from 55.7 the prior month. Still, that beat expectations for a decline to 54.2. The service side of the economy — such as retailers, banks, and hospitals — employs most Americans and has driven the expansion since the pandemic. The S&P Global “flash” PMI surveys are among the first indicators of each month to give a sense of how well the U.S. economy is doing. Perhaps the largest negative in the report was the resumption of inflation pressures as virtually every company reported rising costs. “Strong [survey] readings for August add to signs that U.S. businesses have enjoyed a strong third quarter so far,” said Chris Williamson, business economist at S&P Global.

Manufacturing output surges, but inflation is picking up too

S&P surveys suggest August has been the best month of the year

Source: S&P Global PMI, Bureau of Economic Analysis via S&P Global Market Intelligence.

The Week Ahead

After the surprisingly dovish speech by Federal Reserve Chair Jerome Powell at Jackson Hole on Friday, the central bank’s preferred inflation gauge is among the highlights this week. That comes on Friday when the Bureau of Economic Analysis (BEA) releases the Personal Consumption Expenditures (PCE) Price Index for July. Other economic data out next week include the Census Bureau’s Durable Goods report and the Conference Board’s August Consumer Confidence survey on Tuesday, and the BEA’s second estimate on second-quarter GDP on Thursday. Housing market data includes New Home Sales from the Census Bureau on Monday and the National Association of Realtors’ Pending Home Sales Index for July on Thursday. Earnings season is still going with Nvidia headlining a wave of reports from tech and retail firms.

Did You Know?

PRICE CUTS – 25.6% of all properties listed for sale on Zillow had a price cut in June, up from 23.5% last June and a June low of 11.4% in 2021. Denver, Phoenix and Raleigh had the highest percentage of price cuts at 35%+, while Milwaukee, Hartford and New York were all below 15%. (Source: ResiClub)

STABLE GAS PRICES – According to AAA, the national average price of a gallon of gas on August 13 was $3.16. Gas prices are up just +3.2% this year compared to an average year-to-date increase of +17.9%. Over the last 200 days, gas prices have fallen within a range of 6.2% — the narrowest spread since at least 2004. (Source: Bespoke)

TEETOTALERS – The percentage of U.S. adults who consume alcohol dropped to 54% in 2025, the lowest level since at least 1939. For the first time since at least 2001, more than half of adults say drinking is bad for their health, led by 18 – 34-year-olds at 66%. 46% of Republicans drink compared to 61% of Democrats. (Source: Gallup)

This Week in History

STATESIDE STEAMBOATS – On August 22, 1787, John Fitch launched the first successful steamboat run in U.S. waters when his 45-foot boat smoked and boomed up the Delaware River. But he never got costs under control, so Robert Fulton—whose own steamboat launch came 20 years later—is instead remembered as the father of the steamboat. (Source: The Wall Street Journal)

Economic Review

• The Conference Board Leading Economic Index® (LEI) declined by -0.1% in July to 98.7, after falling -0.3% in June (unrevised). That was in line with Wall Street expectations. Breadth of the index was decent with just 3 of the 10 indicators tracking negative for the month, while six were positive and one was unchanged. The decline was driven again by a sharp drop in Consumer Expectations of Business Conditions, which contributed the largest decline (-0.19) after contributing a -0.22 and -0.24 the prior two months. Like the prior 3 months, manufacturing New Orders (-0.18) was the next largest negative contributor to the monthly decline. Stock Prices led the gains with a +0.18% advance following the +0.15% jump and +0.33% surge the prior two months. The Conference Board Coincident Economic Index® (CEI) rose by +0.2% to 114.9, a new all-time high, after being little changed the prior 3 months. The Conference Board Lagging Economic Index® (LAG) was unchanged at 119.9, the third straight month at that level.
• July Housing Starts increased +5.2% month-over-month to a seasonally adjusted annual rate of 1.428 million units, beating expectations for a -1.8% dip to 1.297 million units. That compares to a +5.9% rise, or 1.358 million units from the prior month (revised higher from 1.321 million units). Single-unit starts were up +2.8%, compared to a -3.8% drop the prior month. Multi-family units were up 9.9% after surging +33.6% the prior month. Housing starts peaked at 1.8 million in April 2022. Regionally, new construction single-unit starts were down -15.0% in the Midwest, -7.1% in the West, -8.3% in the Northeast, and up +13.2% in the South. Building Permits, one of the leading indicators tracked by the Conference Board and an indicator of future construction activity, sank -2.8% to an annualized rate of 1.354 million units. That fell short of expectations for 1.386 million units and compared to the prior month’s -0.1% decline to 1.393 million units. The good news was that single-unit permits improved +0.5%, while multi-family units were down -8.2%. Regionally, single-unit permits rose +3.6% in the Northeast and +0.6% in the South but were flat in the Midwest and down -0.6% in the West. The bottom line is that single unit starts and permits didn’t show much strength which is needed for more affordable single-family homes for sale.
• The National Association of Realtors (NAR) reported that Existing Home Sales rose +2.0% in July to a seasonally adjusted annual rate of 4.01 million units, above expectations for a -0.3% drop to 3.92 million units and up from the -2.7% decrease of 3.93 million units reported the prior month (unrevised). Year-over-year existing sales were up +0.8%. The Median Existing Home Price fell to $422,400. Year-over-year, home prices were up +0.2% compared to a +1.4% annual rate the prior month. It is the seventh consecutive month of slowing annual price changes. The Inventory of Homes for Sale increased +0.65% from the prior month to 1.55 million units. Unsold Inventory sits at a 4.6-month supply, down from 4.7 the previous month. This still lags the 6.0-month supply typically associated with a more balanced market. Homes Listed for Sale remained on the market for 28 days on average, up from 24 days the previous year. First-Time Buyers were 28% of sales in the month, down from 30% the month before. Historically, these buyers make up closer to 40% of home sales, but affordability has been hit hard in the last two years due to fast-rising home prices and higher mortgage rates. All-Cash Sales ticked up to 31% of transactions from 29% the prior month. For the month, sales jumped +8.7% in the Northeast, rose +2.2% in the South, inched up +1.4% in the West, but fell -1.1% in the Midwest. 
• Homebuilder confidence ticked down in August, as the National Association of Home Builders (NAHB) Housing Market Index (HMI) slipped to 32 from 33 the prior month, short of expectations for 34. A year ago, the index stood at 39. The index is based on a 0-to-100 scale, where any number over 50 indicates a good reading, and below 50 is considered negative sentiment. Sentiment has been in negative territory for 16 months in a row. The Current Sales component was down -1 point to 35, while Sales Expectations in the Next Six Months was unchanged at 43, and Traffic of Prospective Buyers improved +2 points to 22. For the month, 37% of builders reported cutting home prices, compared to 38% the prior month, which was the highest level since 2022, when the survey started tracking this figure. The average price reduction was unchanged at 5%, where it’s been every month since last November. The use of sales incentives beyond price cuts increased to 66% from 62%, the highest level since May 2020. 
• The Philly Fed Manufacturing Business Outlook Survey fell to -0.3 in August from +15.9 the month before. That was far short of Wall Street forecasts for a decline to +6.5. Readings above zero indicate economic expansion and below zero signal economic contraction. The indexes for New Orders sank to -1.9 from +18.4 and Shipments fell to +4.5 from +23.7. The Employment index fell to +5.9 from +10.3. Both inflation gauges increased, with Prices Paid and Prices Received up to +66.8 from +58.8 and +36.1 from +34.8, respectively. The Prices Paid marks the highest rate since June 2022, which was the peak of the post-pandemic bout of inflation.
• Weekly MBA Mortgage Applications slipped -1.4% for the week ending August 15, following a +10.9% rise the prior week. The Purchase Index was up +0.1% after gaining +1.4% the prior week. The Refinance Index slipped -3.1% after a +23.0% increase the prior week. The average 30-Year Mortgage Rate ticked up to 6.68% from 6.67% the prior week.
• Weekly Initial Jobless Claims rose +11,000 to 235,000 for the week ending August 15, worse than expectations for 225,0000. The prior week was unrevised. The number of people already collecting unemployment claims (i.e., Continuing Claims) rose +30,000 to 1,972,000 for the week ending August 8, worse than expectations for 1,960,000. The prior week’s reading was revised lower from 1,953,000.

Asset Class Performance

Source: Bloomberg.
Asset‐class performance is presented by using market returns from an exchange‐traded fund (ETF) proxy that best represents its respective broad asset class. Returns shown are net of fund fees for and do not necessarily represent performance of specific mutual funds and/or exchange-traded funds recommended by The Retirement Planning Group. The performance of those funds may be substantially different from the performance of the broad asset classes and to proxy ETFs represented here. US Bonds (iShares Core US Aggregate Bond ETF); High‐Yield Bond (iShares iBoxx $ High Yield Corporate Bond ETF); Intl Bonds (Vanguard Total International Bond ETF); Large Growth (iShares Russell 1000 Growth ETF); Large Value (iShares Russell 1000 Value ETF); Mid Growth (iShares Russell Mid-Cap Growth ETF); Mid Value (iShares Russell Mid-Cap Value ETF); Small Growth (iShares Russell 2000 Growth ETF); Small Value (iShares Russell 2000 Value ETF); Intl Equity (iShares MSCI EAFE ETF); Emg Markets (iShares MSCI Emerging Markets ETF); and Real Estate (iShares US Real Estate ETF). The return displayed as “Allocation” is a weighted average of the ETF proxies shown as represented by 24% US Bonds, 10% International Bonds, 6% High Yield Bonds, 13.8% Large Growth, 13.8% Large Value, 3.6% Mid Growth, 3.6% Mid Value, 1.2% Small Growth, 1.2% Small Value, 16.8% International Stock, 4.2% Emerging Markets, 1.8% Real Estate.
* The term basis points (bps) refers to a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 0.01%. Bond prices and bond yields are inversely related. As the price of a bond goes up, the yield decreases.