Economic Update 9-08-2025

On a holiday-shortened week, economic data included stronger ISM services and manufacturing PMI surveys, while the August employment situation report came in again weaker than expected.

Equities experienced gains worldwide to varying degrees, largely upon hopes of easier Federal Reserve policy. Bonds gained as yields fell in response to weaker jobs data. Commodities were mixed to lower, with higher supplies in a variety of goods.

U.S. stocks were up slightly, with growth and small cap again outperforming the broader S&P 500. Although it didn’t appear to affect markets too much, during the Labor Day weekend, the Court of Appeals for the Federal Circuit affirmed the Court of International Trade’s May ruling blocking the Trump tariffs placed under the IEEPA (which account for about half of the tariffs placed this year, or 8 percentage points). However, these could remain in place based on acts from the 1960s and 1970s on national security grounds, unfair trade practices, or via persistent trade deficits. However, no changes have been put into effect until next month, or a judgment or other notice comes from the Supreme Court, which could delay things further.

By sector, communications and consumer discretionary led with gains of several percent for the week, while most other areas were flat or experienced declines, led by energy and financials. Real estate was down a fraction of a percent. Within communications, shares of Alphabet soared by over 10% as a federal judge ruled that Google wouldn’t be forced to divest its popular Chrome internet browser to satisfy antitrust concerns.

Foreign stocks were mixed, with developed markets performing similar to U.S. stocks—with gains in Japan offsetting losses in Europe. In Europe, fears of weakening global growth weighed on the region, as did continued government uncertainty in France, and a more hawkish tone from the ECB, with rate cuts having likely come to an end. Emerging market stocks also saw gains, led by Mexico, Taiwan, and South Korea, which may benefit from an overturn or delay in certain U.S. tariff policies.

Bonds gained last week, with U.S. Treasuries and investment-grade corporates rising around a percent last week, along with a drop in long-term yields. This was largely driven by weaker labor market data, noted above, that raised the already-high odds of a Federal Reserve rate cut in September. High yield and floating rate bank loans also gained, albeit to a far lesser degree. Foreign bonds gained as well, despite little change in the dollar, although expectations continue for future dollar weakness along with a Fed cut. Conditions remain mixed overseas, with long-term yields in the U.K. rising to nearly 30-year highs as the Prime Minister announced a cabinet reshuffle, weighing on confidence.

Commodities were down for the most part, with negative results from energy and agriculture, only partially offset by a gain of several percent in precious metals. Crude oil prices fell -3% last week to $62/barrel, upon higher U.S. supplies reported, as well as expectations for OPEC+ to increase production as well (which they did over the weekend). A variety of agricultural contracts, such as wheat and soybeans, have been held down by a good harvest season, raising supply, coupled with tepid demand, at least relative to expectations.

Period ending 9/5/2025	1 Week %	YTD %
DJIA	-0.26	8.03
S&P 500	0.37	11.20
NASDAQ	1.16	12.89
Russell 2000	1.07	8.20
MSCI-EAFE	0.25	23.10
MSCI-EM	1.42	20.71
Bloomberg U.S. Aggregate	0.93	5.96

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
8/29/2025	4.23	3.59	3.68	4.23	4.92
9/5/2025	4.07	3.51	3.59	4.10	4.78

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.