Week in Review - August 22, 2025
The main event for the stock market this week was the highly anticipated speech by Federal Reserve Chairman Jerome Powell from Jackson Hole, Wyoming. Stocks traded down most of the week as there was much speculation and consternation as to whether Chair Powell would hint at a September rate cut or not.Stocks and bonds decidedly concluded that the Fed would proceed with a rate cut as US indexes closed positive on the day clawing back most of the losses on the week and ending the week mostly flat. Bonds ended the week on a positive note as well with US Treasuries in the 7-10 year maturity range ending the week on a positive note.
Chairman Powell’s speech was fairly dovish and when taking into account the notes from the Federal Reserve’s economists, the message appears to be even more dovish.There were four main takeaways that we had from the speech today:
- The impact from tariffs will not be long lasting. The Federal Reserve's economists have acknowledge that the impact on inflation from tariffs has been less than previously anticipated.
- Downside risks to the labor market remain. The cracks in the labor market are not necessarily related to immigration policy.
- Inflation expectations remain well anchored, meaning that market participants don't expect runaway inflation in the future.
- Minimal risk to tariff related price increases due to muted risk of wage spikes. The Federal Reserve economists see the weakness in the labor market keeping wage inflation low. Wage inflation was a big reason for the inflation that we experienced in 2022, which we had not seen since the 1970's.
Have a great weekend and please reach out to the team at Gordon Asset Management, LLC if you have questions!
All the best,
Gordon Asset Management, LLC