Federal Reserve Chair Jerome Powell delivered his much-anticipated speech at Jackson Hole last
Friday—and the markets certainly responded.
Most U.S. stock indexes ended the week in the green, with the exception of the Nasdaq, which slipped 0.53%. The Dow led the way, gaining 1.55% and reaching record territory. The S&P 500 edged up 0.27%, while the Russell 2000 jumped 3.11%.
Foreign markets also saw solid gains: developed international stocks rose 1.11%, and emerging markets added 1.32%.
Meanwhile, the 10-year U.S. Treasury yield sits at 4.27%—a level that continues to influence borrowing costs across the board.
Powell’s Message:
In his remarks, Powell walked a tightrope. He acknowledged the Fed’s challenge: navigating a weakening labor market while facing the possibility of higher prices from tariffs.
The labor market is clearly cooling. Over the past three months, the U.S. has averaged just 35,000 new jobs per month, according to CNBC—a far cry from the levels needed to support long-term economic growth.
On the inflation front, the Producer Price Index (PPI) rose 0.9% in July. This jump could signal that tariff-related cost pressures are beginning to ripple into Corporate America.
Are Rate Cuts Around the Corner?
Before the latest jobs data and Powell’s speech, the Fed seemed undecided on rate cuts. Now, markets are betting on a cut in September—and possibly more to follow.
To put things in perspective: at last year’s Jackson Hole meeting, unemployment was at 3.4%. Today, it stands at 4.2%. While still healthy, that’s a meaningful increase that hasn’t received much attention.
The key questions now:
- Will rising input costs be absorbed by companies—or passed on to consumers?
- If companies absorb the costs, will profits (and stock prices) take a hit?
- If consumers bear the brunt, will spending slow down?
- And, are these tariffs a one-time shock—or the beginning of ongoing price pressures?
These are the dynamics the Fed—and the markets—will continue to watch closely.
Inflation: A Slow Burn?
One concern is that companies won’t all respond to higher costs at once. Some might absorb them temporarily; others might raise prices right away. That staggered response could make inflation feel like it’s creeping up slowly over time.
Remember how inflation spiked post-COVID? Consumers were eager to spend, but global supply chains weren’t fully back online. Demand outpaced supply, and prices surged.
The silver lining? Many U.S. companies have posted strong profits in recent quarters, giving them some cushion to absorb higher costs—at least in the short term.
Consumer Spending Still Strong
Despite economic headwinds, consumers are still opening their wallets. Restaurants and car dealerships remain busy.
In fact, my wife Michelle and I dined at Johnny’s Café in Margate on Friday, and The Palm in Atlantic City on Saturday. Both places were packed—and certainly not budget-friendly!
Car sales have also ticked up recently. That could be partially driven by the looming expiration of the EV tax credit, set to end September 30, 2025.
The Week Ahead
So, what’s next?
We’ll see if markets build on Friday’s rally. It’s possible investors have already priced in a September rate cut.
On the economic calendar: housing data, durable goods orders for July, and the all-important Personal Consumption Expenditures (PCE) index. Also worth watching: the Advance Goods Trade Balance report, which could shed light on how tariffs are affecting trade.
It’s the final week of summer, typically a quiet time for trading volume. But don’t let that fool you. Volatility in either direction doesn’t take vacations.
Looking Ahead
Hard to believe, but one year from now we may be deep into conversations about mid-term elections and their market impact. Buckle up—plenty more to come.
As always, thank you for reading and staying informed.
Enjoy these last days of summer!
All data sourced from Wall Street Journal August 22, 2025.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested directly.
