What We're Seeing and What We're Watching

For the week of August 18th

Monday, August 18, 2025

WHAT WE'RE SEEING...

Stock market:

The stock market notched some solid gains last week as professional investors raised their

expectations for the Federal Reserve’s interest rate cuts in September, and as President Trump fanned hopes for an end to the fighting in Ukraine. The iconic Dow Jones Industrial Average added 770 points, closing on the doorstep of 45,000. The broadbased Standard & Poor’s 500 Index (S&P 500 Index) added just under 1%, closing at 6,450. The growth-oriented Nasdaq Composite Index added 0.8%, closing at 21,623.

The repeated theme in our professional reading is the lofty valuation of the S&P 500 Index. Widely accepted metrics, such as price-to-earning (PE) ratios, have reached extreme levels. One pundit even characterized the current market sentiment as “Pollyannaish”. Investment professionals in the bullish camp say the lofty valuations are justified because the AI (artificial intelligence) revolution is in its early innings and promises to stimulate an era of extraordinary economic growth. On the other hand, the “doubting Thomas” investors say today’s stock prices are in “bubble” status and a bone-jarring sell-off could be triggered at any time. While we think risk and uncertainty may be in the red zone, it’s reasonable to respect the message of the stock market’s upward momentum. That said, we are on our toes and sticking with our slightly conservative leaning asset allocation plans.

Interest rates:

We saw mixed inflation messages from the Consumer Price Index (CPI) and Producer Price Index (PPI) this week. The bond market shrugged its shoulders and responded with another quiet week for interest rates. The yield on the widely followed 10year US Treasury note rose a mere four basis points to 4.32%. We think interest rates are merely oscillating within their recent trading ranges. 

Yahoo Finance reports that professional investors are assigning a very high probability to an interest rate cut of 0.25% by the Federal Reserve at its September meeting. The underlying message of an interest rate cut (albeit small) would be that the FED believes inflation is not a looming threat. 

Our preferred money market fund yield declined slightly to 3.93%.

We believe that keeping an eye on gold and oil prices helps us make more informed decisions about asset allocation, risk management, and potential investment opportunities.

Gold and Oil:

Gold was lower by about $76 per ounce for the week, closing at $3,382 per ounce. Oil prices were slightly higher by about $0.80 per barrel, closing at $64.14 per barrel.  We believe that keeping an eye on gold and oil prices helps us make more informed decisions about asset allocation, risk management, and potential investment opportunities.

WHAT WE'RE WATCHING...

 Next week, the investment world will be paying close attention to Federal Reserve Chair Jerome Powell’s speech at a meeting of the world’s central bankers in Jackson Hole, Wyoming. This is an annual August tradition, and we will be watching to see and hear what Chair Powell says about inflation, employment and interest rate policy. This year’s speech promises to be especially interesting considering the very public criticism of Chair “Too Late” Powell by President Trump.

Next week will also witness quarterly earnings reports from some of America’s largest retailers, such as Walmart and Home Depot. These reports may provide important insight into consumer spending, which plays a major role in the growth of our economy. We may also hear how tariffs are affecting these important companies.

With nearly four decades of experience guiding clients through up and down markets, we know that strategic discipline—rather than emotion—is the key to long-term success.

As we close this week’s review, be assured that we remain focused on the time-tested principles of asset allocation, diversification, and risk management. With nearly four decades of experience guiding clients through up and down markets, we know that strategic discipline—rather than emotion—is the key to long-term success. While we expect some turbulence in August and September, our intermediate-term outlook for the stock market remains positive, and we continue to adjust strategies as needed to position portfolios for resilience and sustainable growth.

Thanks for taking the time to read this update. We value your thoughts and questions, since feedback is and always will be the breakfast of champions. Most of all, we appreciate your ongoing trust and confidence as we move forward together.

A closing thought from the book of Proverbs in The Passion Translation (circa 2020): “Let your life be shaped by integrity, with truth written upon your heart. That’s how you will find favor and understanding with both God and men—you will gain the reputation of living life well.” (Proverbs 3:3b-4)

Bruce Robinson, CFP

Sources: LPL Financial, CNBC.com, Yahoo Finance and The Passion Translation®

(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 into directly.)