Quick Takes
- Equities Rally. U.S. stock indices rose in August as investors were encouraged by strong earnings results from companies in Q2, continued investment in AI by large technology firms, and interest rate cuts in the last three months of the year. The S&P 500 rose 3.6% while the Nasdaq 100 rose 2.9%.
- Inflation and Interest Rates. The 10Y treasury yield fell in August to 4.2% as investors stepped-up bets that the Federal Reserve would cut rates through the end of the year. Fed Chair Powell hinted in his speech at Jackson Hole that the FOMC would be open to a rate cut in September.
- Russia-Ukraine & Oil Markets. Oil prices rose slightly in the back half of August as efforts to end the War in Ukraine fell short. Despite the Trump administrations efforts to end the war, Russian forces continued to carry out strikes on Kyiv, Ukraine’s capital, and other parts of the country.
- Nvidia Earnings. Nvidia reported earnings that generally exceeded expectations for Q2 despite the company’s data center revenue, which includes its sales of advanced chips, falling slightly short of analyst forecasts. Despite not selling to Chinese customers, Q2 revenue grew nearly 56% over the same period last year.
Asset Class Performance
Small caps outperformed large caps in August and International stocks outperformed U.S. stocks as generally strong quarterly results and rate cuts hopes from the Fed boosted stocks in August. Equities, bonds, and real estate generally rose in August while the U.S. Dollar fell.
Markets & Macroeconomics
July nonfarm payrolls were 79K, falling well short of the expected 105K additions. Hiring was strongest in education and health services, which added 77K positions during the month. Job growth was weakest in professional and business services, information services, and mining and logging, which shed a combined 23K positions during the month. Manufacturing cut 2K positions in July, marking the third consecutive month of job losses in the sector. Initial jobless claims rose during the month reaching 237K by the week of August 30. The unemployment rate rose to 4.2% from 4.1% and the labor force participation rate fell slightly from 62.3% to 62.2%. On the prices side of the Fed’s dual mandate, headline CPI inflation came in slightly below expectations at 2.7% as food and energy price inflation fell during the month.
Despite this, core CPI inflation rose from 2.9% to 3.1% during the month as household furnishings and supplies, transportation goods, and medical care servicesinflation accelerated. New and used car prices and car parts experienced a notable acceleration in their prices in July. PCE inflation, the Fed’s favored inflation metric generally told a similar story with headline PCE rising 2.6% year-over-year and core PCE rising 2.9%. Producer inflation experienced its largest acceleration in three years with headline PPI inflation accelerating from 2.3% year-over-year in June to 3.3% in July and core PPI accelerating from 2.6% to 3.3%. Consumer spending generally held well in July with personal spending and retail sales increasing 0.5% month-over-month, in-line with and slightly shy of expectations, respectively.
Consumer sentiment was mixed in July and August with Conference Board Consumer Confidence remaining flat at 97.4 in July while University of Michigan Consumer Sentiment came in below expectations and June levels for July and the first half of August. Manufacturing was mixed with durable goods falling July and, although less than anticipated, and industrial production declining slightly month-overmonth. Manufacturing ISM PMI came in below expectations and lower than June’s level at 48.0, indicating another month of contraction while the S&P manufacturing PMI indicated a milder contraction at 49.8. Equity markets continued upward and the 10Y yield fell in August as investors remain hopeful that the Fed will cut rates in September.
Bottom Line: Slow hiring, slightly higher unemployment, and mixed manufacturing data likely mean a Fed cut in September, but accelerating inflation makes it risky.
©2025 Prime Capital Investment Advisors, LLC. The views and information contained herein are (1) for informational purposes only, (2) are not to be taken as a recommendation to buy or sell any investment, and (3) should not be construed or acted upon as individualized investment advice. The information contained herein was obtained from sources we believe to be reliable but is not guaranteed as to its accuracy or completeness. Investing involves risk. Investors should be prepared to bear loss, including total loss of principal. Diversification does not guarantee investment returns and does not eliminate the risk of loss. Past performance is no guarantee of comparable future results.
Source: Sources for this market commentary derived from Bloomberg. Asset‐class performance is presented by using market returns from an exchange‐traded fund (ETF) proxy that best represents its respective broad asset class. Returns shown are net of fund fees for and do not necessarily represent performance of specific mutual funds and/or exchange-traded funds recommended by the Prime Capital Investment Advisors. The performance of those funds June be substantially different than the performance of the broad asset classes and to proxy ETFs represented here. U.S. Bonds (iShares Core U.S. Aggregate Bond ETF); High‐Yield Bond (iShares iBoxx $ High Yield Corporate Bond ETF); Intl Bonds (SPDR® Bloomberg Barclays International Corporate Bond ETF); Large Growth (iShares Russell 1000 Growth ETF); Large Value (iShares Russell 1000 Value ETF); Mid Growth (iShares Russell Mid-Cap Growth ETF); Mid Value (iShares Russell Mid-Cap Value ETF); Small Growth (iShares Russell 2000 Growth ETF); Small Value (iShares Russell 2000 Value ETF); Intl Equity (iShares MSCI EAFE ETF); Emg Markets (iShares MSCI Emerging Markets ETF); and Real Estate (iShares U.S. Real Estate ETF). The return displayed as “Allocation” is a weighted average of the ETF proxies shown as represented by: 30% U.S. Bonds, 5% International Bonds, 5% High Yield Bonds, 10% Large Growth, 10% Large Value, 4% Mid Growth, 4% Mid Value, 2% Small Growth, 2% Small Value, 18% International Stock, 7% Emerging Markets, 3% Real Estate.
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