Economic Update 8-11-2025

Economic data was light, and included a slight decline in ISM services, toward neutral, while jobless claims continued to tick up a bit.

Equities gained worldwide last week, with international outpacing U.S. by a bit. Bonds were mixed, with foreign bonds benefitting from a weaker U.S. dollar. Commodities saw gains in metals, but weaker energy prices due to both supply and demand concerns.

 U.S. stocks saw gains for the week, rebounding from a sharply negative prior week. By sector, gains were led by technology (largely from Apple, upon announcing U.S.-based manufacturing investments) and consumer discretionary (largely from Tesla), each up around 4%, followed by communications and consumer staples. Energy and health care saw declines of nearly a percent (with the latter exclusively due to Eli Lilly, related to GLP-1 product sensitivity). Real estate was down just slightly for the week.

Stocks were held back a bit early in the week by the poor ISM services reading, and continued investor focus on the poor labor market report the prior week, which made a Fed rate cut in Sept. even more of a foregone conclusion (even though it was anyway). In fact, there was some chatter as to whether the cut would be -0.25% or -0.50%, as seen in the Sept. meeting a year ago. There are several more data points to come out between now and then, but the speed of labor market slowing is certain to be a key Fed discussion point. Also, following the resignation of Fed Gov. Kugler late the prior week, speculation was growing around a possible replacement, who could vote as early as the Sept. meeting. The next Fed chair must be selected from a member of the board at that time, so a nominee could represent a current favorite for that role. (By Thursday, Stephen Miran, the current chair of the Council of Economic Advisors, was announced as her replacement for at least the remainder of her term ending Jan. 2026. This was seen as a move toward the dovish side, in line with what the administration had intended.)

U.S. S&P 500 earnings for the 2nd quarter have been nearing a close. Per FactSet, 90% of firms have reported, showing a 11.8% blended earnings growth rate, more than double initial expectations, which created a fairly low bar. Interestingly, despite some signs of economic slowing, there was also an 87% drop in companies mentioning ‘recession’ during their calls, with the most-mentioned sectors unsurprisingly including real estate, industrials, and financials. Too-early expectations for Q3 point to earnings growth at just over 7%, which would also be a bit above average, with full year earnings for 2025 growing at a rate just over 10%, which would also be considered robust.

Foreign stocks outperformed U.S. for the week, helped by a weaker dollar to some extent, with Japan and Europe outgaining the U.K. and emerging markets. The Bank of England cut rates by another -0.25% to 4.00%, on a narrow 5-4 vote (much more common than it is in the U.S., where a few dissents caused quite a stir the prior week). In EM, gains were relatively widespread, led by Brazil, South Africa, and South Korea, while India was one of the few losing ground—all were generally driven by either tariff rumor or announcements. An additional 25% tariff on India was applied, taking the total to 50%, as punishment for purchases of oil and arms from Russia. After exemptions, the total is expected to be around 30%. Tariff negotiations with Switzerland also appeared to break down, leaving headline tariff rates just under 40%.

Bonds were mixed for the week, as interest rates ticked up a bit across most of the U.S. Treasury yield curve. Government and investment-grade corporates fell back a bit, while high yield and floating rate bank loans experienced minor gains. Foreign bonds were also mixed, driven by a drop in the U.S. dollar, while emerging market debt saw strong gains as spreads continued to move to increasingly tight levels.

Commodities were mixed, with a decline in energy prices offset by gains in industrial and precious metals, as well as agriculture. Crude oil prices fell nearly -6% last week to $63/barrel, as talks between the U.S. and Russia raised hopes of a resolution to the Russia-Ukraine conflict, as well as continued production increases from OPEC+, and tariff concerns related to global demand. The price of gold rose, as reported U.S. tariffs on gold from Switzerland caused some market confusion about ultimate trading effects, although this was clarified as a non-issue later in the day Friday. This was in addition to assumed Fed rate cuts looking ahead, which potentially renders precious metals more attractive compared to bonds in relative terms.

Period ending 8/8/2025	1 Week %	YTD %
DJIA	1.37	4.85
S&P 500	2.44	9.47
NASDAQ	3.88	11.50
Russell 2000	2.41	0.26
MSCI-EAFE	2.87	20.69
MSCI-EM	2.31	18.58
Bloomberg U.S. Aggregate	-0.18	4.40

U.S. Treasury Yields	3 Mo.	2 Yr.	5 Yr.	10 Yr.	30 Yr.
12/31/2024	4.37	4.25	4.38	4.58	4.78
8/1/2025	4.35	3.69	3.77	4.23	4.81
8/8/2025	4.32	3.76	3.84	4.27	4.85

Sources:  LSA Portfolio Analytics, American Association for Individual Investors (AAII), Associated Press, Barclays Capital, Bloomberg, Deutsche Bank, FactSet, Financial Times, Goldman Sachs, JPMorgan Asset Management, Kiplinger’s, Marketfield Asset Management, Minyanville, Morgan Stanley, MSCI, Morningstar, Northern Trust, Oppenheimer Funds, Payden & Rygel, PIMCO, Rafferty Capital Markets, LLC, Schroder’s, Standard & Poor’s, The Conference Board, Thomson Reuters, U.S. Bureau of Economic Analysis, U.S. Federal Reserve, Wells Capital Management, Yahoo!, Zacks Investment Research.  Index performance is shown as total return, which includes dividends, with the exception of MSCI-EM, which is quoted as price return/excluding dividends.  Performance for the MSCI-EAFE and MSCI-EM indexes is quoted in U.S. Dollar investor terms.

The information above has been obtained from sources considered reliable, but no representation is made as to its completeness, accuracy or timeliness.  All information and opinions expressed are subject to change without notice.  Information provided in this report is not intended to be, and should not be construed as, investment, legal or tax advice; and does not constitute an offer, or a solicitation of any offer, to buy or sell any security, investment or other product.