Economic Update 8-25-2025

Economic data included gains in existing home sales and housing starts, while the index of leading economic indicators continued to move in a negative direction. Fed Chair Powell’s comments at their Jackson Hole symposium pointed to higher chances of a September interest rate cut.

Equities gained globally, with hopes for lower U.S. policy yields, with an especially strong week for U.S. small cap. Bonds gained as yields fell across the Treasury curve. Commodities also saw price gains broadly in a variety of segments.

U.S. stocks saw moderate gains, with flattish returns most of the week, and investors waiting for Friday’s keynote speech from Fed Chair Powell at their annual Jackson Hole Symposium, where a variety of economic and monetary policy matters are discussed. The hope (from markets anyway) was for more concrete hints of September rate cuts. The speech was seen as dovish by markets, which pushed stocks higher by over a percent. Specifically, he noted that the underlying outlook and “shifting balance of risks may warrant adjusting our policy stance,” and that lower immigration “suggests that downside risks to employment are rising,” and potential risks could materialize quickly if they did occur.

For the week, small cap stocks strongly outperformed large cap, and value outperformed growth, each of which seen as being stronger beneficiaries of Fed rate cuts. By sector, energy, materials, and financials led the way up several percent, with the only laggard being technology, down over 1%, led by several Magnificent 7 stocks. Real estate also gained several percent for the week, with hopes for more accommodative interest rates in coming months.

Foreign stocks also saw gains, led by the U.K., which outperformed Europe and Japan, the latter being the only one to lose ground for the week. Sentiment appeared to be driven by strength in European business activity, easier U.S. Fed policy, as well as hopes for progress in the Russia-Ukraine peace talks. Emerging markets were flattish overall, with gains in China and Brazil offset by declines elsewhere.

Bonds gained across the board as yields fell across the U.S. Treasury curve, with governments, investment-grade credit, and high yield performing similarly. Foreign bonds performed in line with domestic, with little change in the value of the U.S. dollar for the week.

Commodities rose across the board, with all of the major groups up several percent, led by energy. Crude oil prices rose over a percent last week to $64/barrel, as domestic inventories fell, while natural gas prices declined over -7% as summer temperatures cooled off in much of the country and the high-demand summer season is coming to an end during the next few weeks.

Period ending 8/22/2025	1 Week %	YTD %
DJIA	1.59	8.42
S&P 500	0.30	10.88
NASDAQ	-0.55	11.80
Russell 2000	3.32	6.82
MSCI-EAFE	0.84	24.58
MSCI-EM	-0.41	19.93
Bloomberg U.S. Aggregate	0.43	4.82

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
8/15/2025	4.30	3.75	3.85	4.33	4.92
8/22/2025	4.27	3.68	3.76	4.26	4.88

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.