Jackson Hole to Set the Stage

August 18, 2025

RECAPPING LAST WEEK

Investors’ growing confidence on interest rate cuts propelled the S&P500 and Nasdaq Composite

indices nearly 1% higher to new record weekly closes despite mixed inflation data. The Russell

2000 jumped 3%, and international stocks posted solid gains. An extension of the tariff truce

between the U.S. and China also boosted sentiment. Seven of eleven S&P500 sectors finished

positive, led by healthcare, communications, and discretionary. Crude oil prices were little

changed even as OPEC raised its global oil demand forecast for 2026 and lowered its estimate for

U.S. supply growth, suggesting a tighter market.

Gold futures fell 2% as traders awaited further clarification on whether gold bars would be subject to

U.S. tariffs. Ethereum continued to dominate cryptocurrency flows, surging 18% before settling for an

8% weekly gain. U.S. Treasury yields initially moved lower after Tuesday’s CPI report, which revealed that consumer prices

increased only moderately last month. That news also sent equity indices sharply higher as rate

cut expectations increased. However, Thursday’s producer price index report showed a 0.9%

jump MoM due to a large increase in services and food prices, a result in line with economists’

view that tariffs continue to pose higher inflation risks. Two-year Treasury yields—a good proxy for

where investors think the Fed funds rate is headed—fell to a three-month low of 3.66% before

ending the week modestly higher at 3.76%. Meanwhile, the odds of a September rate cut—which

approached 100% after the CPI report—still stood near 85% at week’s end, despite the upsurge in

wholesale prices.

In other economic news, U.S. consumer sentiment sank to 58.6 this month, well

below estimates of 62.0. Inflation expectations were the main reason for the drop, as the one-

year outlook rose to 4.9% from 4.5%, while the long-run view increased to 3.9% from 3.4%. Retail

sales, which are not adjusted for inflation, grew 0.5% last month, and the June figure was revised

up to 0.9%. Overseas, China’s industrial production and retail sales figures for July missed

forecasts, raising pressure on the government to create additional stimulus measures to stoke

domestic demand. Japan’s economy expanded at a better-then-expected 1% annualized pace in

Q2 and 0.3% QoQ as export volumes performed well in the face of tariffs. Australia’s central bank

lowered rates by 25 basis points to 3.60% on Tuesday while downgrading the country’s economic

outlook. Another rate cut is expected later this year even as wage growth remained elevated.

Finally, Eurozone GDP grew by just 0.1% in Q2 as industrial output dipped, while Britian reported

growth of 0.3% after a 0.7% expansion in the prior quarter.

THE WEEK AHEAD

On the geopolitical front, President Trump met with Russian President Putin over the weekend to

discuss a ceasefire deal, with Ukrainian President Zelensky headed to Washington today. Looking

at this week’s economic agenda, all eyes will turn to the Kansas City Fed’s annual three-day

symposium, which begins Thursday in Jackson Hole. This gathering is always viewed as an

important signpost for future Fed policy, and this year will be no different, given recent

developments in the U.S. jobs and inflation data, and the political pressure coming from the

current administration.

Fed Chair Powell is scheduled to speak on Friday morning. Additionally, minutes from this month’s FOMC

meeting will be released on Wednesday. August’s flash PMI data arrives this week and will be the first

insights into how the latest round of tariffs are affecting the world’s major developed economies.

There is a slew of housing data on tap, including building permits and existing home sales. Last week,

Warren Buffett’s Berkshire Hathaway revealed major purchases in U.S. homebuilding stocks, as well as in

beleaguered healthcare conglomerate UnitedHealth Group. Earnings reports from retail giants Walmart, Target, and Home Deport round

out the domestic calendar. On the international side, inflation updates from Canada, the UK, and

Japan are some of the major releases scheduled, along with the flash PMI reports.

(Schwab)

Definitions

Annualized Return: The rate at which an investment grows each year over the period to arrive at the final valuation.
Bear Market: A decline of at least 20% from the market’s high point to its low.
Beta: A measure of how an individual asset moves when the overall stock market increases or decreases.
Correlation: A measure of the extent to which two variables are related.
Dividend Yield: The dividend yield or dividend-price ratio of a share is the dividend per share, divided by the price per share. It is also a company’s total annual dividend
payments divided by its market capitalization, assuming the number of sharesis constant.
Developed Markets: A country that is most developed in terms of its economy and capital markets. The country must be high income, but this also includes openness
to foreign ownership, ease of capital movement, and efficiency of market institutions.
Emerging Markets: A country that has some characteristics of a developed market but does not fully meet its standards. This includes markets that may become
developed marketsin the future or were in the past.
GrowthFactor Stocks: Growth stocks are companies expected to grow sales and earnings at a fasterrate than the market average.
LargeCap Stocks: Shares of publicly traded corporationswith a market capitalization of $10 billion or more.
LTM: An acronymfor”Last Twelve Months”or the past one year.
NTM:An acronymfor”Next Twelve Months” or the next one year.
Price Return: The rate of return on an investment portfolio, where the return measure takes into account only the capital appreciation of the portfolio, not including
income generated in the form of interest or dividends.
Total Return: Return on a portfolio of investmentsincluding capital appreciation and income received on the portfolio.
Small Cap Stocks: Small-cap stocks are shares of companieswith a market capitalization of less than $2 billion.
Standard Deviation: In statistics, the standard deviation is a measure of the amount of variation or dispersion of a set of values. A low standard deviation indicates the
valuestend to be close to the historical average of the data set, while a high standarddeviationindicatesthe current value is outside of the historical average range.
Value Factor Stocks: Stocksthat are inexpensive relative to the broad market based on measures of fundamental value (e.g., price to earnings or price to book).

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