September 8, 2025

Written by: Ryan Smith, Associate Portfolio Manager, with contributions from Ryan Kelly, CFA®, Chief Investment Officer

Stock Market

Stocks advanced towards record highs in August as the Dow Jones Industrial Average led US equities up 3.20% and the S&P 500 returned 1.91%. Year-to-date, the S&P, Nasdaq, and Dow have returned 9.84%, 11.44%, and 7.05%, respectively. The highest-performing sectors within the S&P in August include Materials (+5.58%), Health Care (+5.25%), and Communication Services (+3.57%). Internationally, equities were mixed. The Nikkei returned over 4%, while the FTSE 100 gained only 0.6% and the DAX lost 0.68%. Bitcoin was down over 7% for the month.

Bond Market

Bonds rallied in August on bets that the Federal Reserve will cut interest rates at their September meeting. The Bloomberg US Aggregate Bond Index rose 1.2% in August, following a decline of 0.26% in July, and has risen 4.99% year-to-date. The yield curve steepened over the month, with the 2 and 10-year yields declining 34 and 14 basis points, respectively. Following Friday’s job report, Treasuries rose on bets that the Fed may need to lower rates to prevent further cooling in the job market.

Employment

The US labor market cooled much more than expected in August, adding just 22,000 nonfarm jobs while +75,000 was expected. Job gains occurred in health care, but were partly offset by losses in government, mining, quarrying, and oil/gas extraction. The unemployment rate advanced to 4.3% from 4.2% and although little changed from the prior month, this is the highest rate since 2021. Prior month revisions in non-farm payroll also reveal that the June payroll figure of +14,000 has been revised down to -13,000. This is the first time non-farm payroll employment has been negative since 2020.

The Federal Reserve

The Federal Open Market Committee (FOMC) met on July 30th and decided to maintain the current federal funds rate range at 4.25%-4.50%. At the Fed’s Jackson Hole Economic Policy Symposium on August 22nd, Chair Powell hinted at signs that current economic conditions may justify a rate cut in September. While discussing implications of monetary policy, Powell suggested that “…the shifting balance of risks may warrant adjusting our policy stance.” This marked a significant shift by the Chairman, and with the weaker than expected job report, CME is now reporting that traders are pricing in 3 rate cuts by the end of the year. Powell also reiterated a continued focus on evaluating economic data to guide their policy decisions, rather than a predetermined path, as inflation remains slightly above their long-term goal. The July Consumer Price Index (CPI) rose 0.2% over the month and 2.7% on an annual basis, slightly lower than expected. The August CPI report is scheduled to be released on September 11th, 2025.

Sources:

Bloomberg – CRVF – US Treasury Actives Curve 7/31/2025 – 8/29/2025

Bloomberg – COMP – INDU, SPX, NDX, FTSE, Nikkei, Dax – 1-Month

Bloomberg – IMAP – SPX Index – Groups – YTD

https://www.federalreserve.gov/newsevents/speech/powell20250822a.htm

https://www.bls.gov/news.release/empsit.nr0.htm

https://fred.stlouisfed.org/series/PAYEMS

https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html

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S&P 500 – Considered the most widely accepted benchmark for US large cap equities, the S&P 500 index includes 500 notable companies listed in the US and captures approximately 80% of the total publicly traded US stock market capitalization.

Nasdaq – A broad-based stock index comprised of US companies listed on the Nasdaq exchange. Since it opened 1971, a larger percentage of technology stocks have decided to list on the Nasdaq, rather than the NYSE. While the S&P 500 is currently over 34% information technology stocks, the Nasdaq is currently over 62%, which is why many investors use it as a gauge of US tech stock performance.

FTSE 100 – The Financial Times Stock Exchange 100 Index is a capitalization-weighted index of the 100 most highly capitalized companies traded on the London Stock Exchange.