Market Recap - Week of August 11 through August 15, 2025
- Gordon Achtermann, CFP®, CSRIC®, MBA
- Aug 18
- 3 min read
Updated: Aug 19
The S&P 500 index rose 0.9% this week, scaling new peaks in four consecutive trading sessions, as the probability of an interest-rate cut in September remained elevated following divergent inflation reports.
The S&P 500 ended Friday's session at 6,449.80, bringing quarter-to-date gains to 4%, and year-to-date growth to 9.7%.
Following a weaker-than-expected non-farm payrolls report last Friday and a surprise drop in the Institute for Supply Management's US services index, the US seasonally adjusted consumer price index rose 0.2% in July, as expected in a survey compiled by Bloomberg, and below the 0.3% gain in June, according to the Bureau of Labor Statistics on Tuesday.
The odds of a 25-basis-point cut in September reached 99.9% after the soft consumer price data, according to the CME Fedwatch Tool. This near-certain probability, however, dissipated to 92% on Thursday after BLS data showed the Producer Price Index rose 0.9% in July, from no growth in June, and compared with the 0.2% increase forecast in a survey compiled by Bloomberg.
The rate-cut probability settled at 89% late on Friday after the University of Michigan's preliminary consumer sentiment index fell to 58.6 in August from 61.7 in July, below expectations for an increase to 62 in a Bloomberg-compiled survey. Respondents' one-year inflation forecasts at 4.9% were up from 4.5% in July, while five-year inflation outlook climbed to 3.9% from 3.4%.
Healthcare, communication services, and consumer discretionary were the top three gainers this week.
Last Week’s Economic Reports
Headline CPI rose 0.2% m/m (2.7%y/y)
Core CPI rose 0.3% m/m (3.1%y/y)
Retail sales grew 0.5% m/m
Consumer sentiment decreased to 58.6
S&P 500 Sector and Stylebox Returns
Note: L, M, and S are stock categories, referring to Large, Medium, and Small companies, respectively. V, B, and G are stock categories referring to Value, Blend, and Growth, where Value stocks have lower P/E ratios (meaning you pay less for each dollar of earnings per share) and Growth stocks have higher P/E ratios.
Thought of the week:
The shape of the U.S. Treasury yield curve is, by no means, a perfect predictor of the economy’s future, but it does signal what market participants think about the economy and Fed policy.
A“normal” or upward-sloping curve, which has occurred 73% of the time since 1962 (as shown in this week's chart), reflects a generally stable outlook for economic growth, inflation, and monetary policy. It slopes upward because, all other things being equal, investors demand compensation for the extra risk in holding longer-term bonds. An inverted curve is typically a sign of an impending recession, implying that investors expect the Fed to cut short-term rates to battle economic weakness. A flat curve indicates gradually slowing growth or inflation, allowing the Fed to ease gradually. A humped curve suggests the Fed is expected to raise rates aggressively to address hot inflation, but then ease back when the economy slows. Lastly, there is a rare U-shaped curve, which is the shape of the yield curve today. It suggests that current Fed rates are too high compared to those expected 2-3 years from now. However, elevated long-term rates imply that investors will continue to demand a premium due to rising fiscal deficits and long-term inflation.
Given today’s U-shaped curve, investors may want to be more cautious about the extremes. Holding too much cash poses reinvestment risk, and long-end rates may stay volatile. Investing in bonds with 2-3 year maturities may present an attractive middle ground.
Source: JP Morgan (edited)
Up Next
Economic data due next week includes July's building permits and housing starts as well as existing home sales, and minutes of the FOMC's July 29-30 meeting. The week will also see the beginning of the Fed's Jackson Hole Symposium, a congregation of global central bankers, which will be watched even more closely as the Federal Reserve Chair Jerome Powell could use the podium to signal the restart of monetary policy easing in September.
Want more? You can always find our latest Monthly Market Update webinar here:
All the Best,
Gordon Achtermann, CFP®
703-573-7325
Your Best Path Financial Planning
