Economic Update 8-20-2025

Economic data for the week included inflation data that came in more robustly than expected, especially on the producer side. Positive news came from a gain in retail sales, offsetting a drop in industrial production and weaker consumer sentiment.

Equities gained around the world, with similar gains in the U.S. and abroad. Bonds were flattish domestically, with mixed results internationally. Commodities saw gains in agriculture offset by declines in energy and precious metals.

 U.S. stocks gained with sentiment that appeared to be driven by rising hopes for a Fed rate cut in September, along with comments from the U.S. Treasury Secretary, noting that Fed funds “should probably be 150, 175 basis points lower.” By sector, health care, communications, and consumer discretionary led with gains of several percent, while defensive utilities and consumer staples lagged with declines of just over a half-percent. With perceived rate impacts, small caps outperformed large caps by the widest weekly margins in several months.

Foreign stocks gained at a rate similar to or better than U.S. stocks, led by Japan and Europe, with developed markets outperforming emerging markets. Sentiment in Europe especially has been increasingly focused on the chances of a Russia-Ukraine peace deal, which would be positive for regional stability, but seen as perhaps less conducive for defense stocks. In EM, China led the way as the deadline for U.S. tariffs had been extended for another 90 days while a potential deal continues to be negotiated.

Bonds were mixed, with U.S. government bonds falling back a bit as rates rose across the longer end of the yield curve. Investment-grade and high yield corporates fared positively, with help from tighter spreads. Foreign bonds were mixed as the U.S. dollar fell back for the week, with emerging market debt faring positively.

Commodities were mixed, with gains in agriculture offset by declines in energy and precious metals. Crude oil fell about a percent last week to $63/barrel, with little critical news to move the needle in either direction. Gold prices fell back Mon. as the U.S. administration provided assurances that bullion wouldn’t be subject to tariffs.

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