Weekly Market Commentary August 18th to August 22nd 2025

The dog days of summer are here, and it was a very light week for economic data releases. Housing Starts and Building Permits were released on Tuesday and they seemed to go in opposite directions. Starts for July gained 5.1% when a pullback was expected. Permits, however, lost 2.8%, which was more than expected. Closing out the real estate sector on Thursday, Existing Home Sales gained 2.0% for July when a slight drop was expected. The only other notable events were the release of the minutes from the July FOMC meeting and the speech by Fed Chair Powell at the annual Jackson Hole Economic Policy Symposium.

Regarding the minutes, there is evidence that Fed officials are starting to worry about the state of the labor market and the reignition of inflation. “Participants generally pointed to risks to both sides of the Committee’s dual mandate, emphasizing upside risk to inflation and downside risk to employment.” said the notes. But in the end, the Fed decided to hold rates steady. What was unique was it was the first time in 30 years that multiple Fed governors voted against a rate decision, so clearly there are mixed opinions.

In Jackson Hole on Friday, Chair Powell opened the door to possible cuts as early as September. He said, “The baseline outlook and the shifting balance of risks may warrant adjusting our policy stance.” He warned that tariff-related pressures on inflation were clear but that the slowdown in the growth of the labor force should be equally addressed. For the reader’s benefit, the Fed’s dilemma is if they cut rates now, it’s possible that inflation could reignite and ruin all their hard work to get it under control. If they don’t cut rates, they risk slowing the economy to a point where recession may be inevitable. Timing is everything!

In the equity markets, a strong finish on Friday pushed two of the three major indices slightly into the black for the week. The S&P 500 closed at 6,462, up 0.3%; the Dow Jones Industrial Average finished at 45,632, up 1.5%, while the Nasdaq ended down 0.6% at 21,497. In the fixed income markets, the Fed news also caused bonds to rally on Friday with the 10-Year US Treasury Yield finishing at 4.26%, which was slightly off for the week.

Next week’s important economic releases include Personal Consumption and Income, PCE Inflation, New and Pending Home Sales, and a revision to second quarter GDP.