Powell Pivot
August 25, 2025
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U.S. equities and bonds rallied on Friday after Federal Reserve (Fed) Chair Powell’s dovish Jackson Hole speech.1 The S&P 500 Index was up approximately 1.5% on Friday, allowing that index to finish modestly positive for the week.2 Investors are watching whether the rotation out of technology will continue. Small-cap stocks showed strong performance as the Russell 2000 Index climbed almost 4% on Friday and ended the week up by over 3%.3 The stage is set for a rate cut in September, a move the market had already been pricing in, leaving investors to debate how many more cuts to expect in 2025. Powell acknowledged that tariff-induced inflation will probably be “short lived.”4 The balance of risks to the dual mandate (employment and inflation) has shifted following the weak revisions to the labor data. It’s a busier start to the week in terms of mergers and acquisitions; perhaps this is the beginning of more “Merger Mondays.”
In the week ahead, we will watch key economic numbers, including the U.S. home prices for June on Tuesday, the U.S. personal consumption expenditures (PCE) for July on Friday and China’s purchasing managers’ index (PMI) for August after U.S. markets close on Friday.5,6 In addition, we will continue to monitor the Treasury auctions: 2-year on Tuesday, 5-year on Wednesday and 7-year on Thursday.7 A few key earnings reports this week include Nvidia, Dell, Gap, Autodesk and Affirm Holdings.8
Sources:
1,2Yahoo! Finance – Stock market today: Dow jumps 800 points to record, S&P 500, Nasdaq soar as Powell's Jackson Hole finale fuels bets on September rate cut; 8/25/25
3,6-8Bloomberg
4Board of Governors of the Federal Reserve System – Monetary Policy and the Fed’s Framework Review; 8/22/25
5MarketWatch – U.S. Economic Calendar; as of 8/25/25
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