August 18, 2025
It’s certainly been an eventful time for the economy and stock market. Markets are hitting record highs, but inflation and policy uncertainty are tempering expectations for near-term rate cuts. Amid a busy end to the summer, below are the top takeaways from the last week.
Stock Index Performance
- The S&P 500 rose by 0.94%.
- The Nasdaq 100 gained 0.43%.
- The Dow Jones Industrial Average climbed by 1.74%.
Inflation
- Headline inflation stayed put at 2.7% in July, surprising forecasters as tariffs only nipped at consumer prices. It’s also notable that falling energy costs gave wallets a break at the gas pump.
- Under the surface, however, core inflation jumped to 3.1%, its hottest level since winter, thanks to soaring prices for goods and services like used cars and medical care.
- While tariffs haven’t yet sparked sticker shock in autos or appliances, some economists caution that surging prices in other key goods may show that inflation’s reach is spreading.
Labor Market
- While the unemployment rate is still low at 4.2%, slowing payroll growth and job creation fuel speculation that the Federal Reserve may cut rates to support employment, even as inflation lingers.
- In regions affected by tariffs and in sectors with rising input costs (e.g., manufacturing and construction), employers are showing caution regarding wage increases and hiring.
- Despite these headwinds, wages have outpaced inflation on a year-over-year basis for 27 consecutive months, underscoring a positive trend for American workers.
Consumer Sentiment
- Consumer sentiment fell in August for the first time in four months, despite July retail sales rising 0.5% month-over-month and signaling stabilizing spending. The decline may reflect inflation concerns, Fed policy uncertainty, and the pass-through of tariff-driven price pressures.
- While fears of worst-case recession scenarios have faded, most consumers expect inflation and unemployment to deteriorate in the coming months.
The Week Ahead
- The Jackson Hole Symposium begins Thursday, August 21, with markets focused on Federal Reserve Chair Jerome Powell’s Friday address. Investors will watch closely for guidance on the timing and pace of policy easing.
- The U.S. housing market is still stagnant due to high rates. Upcoming data, including housing starts & building permits (Aug. 19) and existing home sales (Aug. 21), will offer constructive insight into sector conditions.
That’s it for this week’s update! August often springs with unforeseen surprises, so if you have any questions or concerns, you can always reach out.
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