Happy Friday. This week we had a lot of news, some notable earnings, and most importantly we finally set the stage for next week’s Fed meeting. Let’s walk through
📊 Weekly Market Recap
- S&P 500 return Year-to-date were approximately 12.20%
- S&P 500 return over the past month were approximately 1.82%
- S&P 500 return over the past 7 days were approximately 1.59%
This Week in the Markets- 3 Things to know
1. Conflicting Inflation Readings– The Producer Price Index slipped 0.1% in August, and now sits at +2.6% year-over-year. Weaker wholesale margins and softer energy costs pulled it down, suggesting pipeline inflation may be losing steam. The next day, the Consumer Price Index showed it rising: 0.4% month-over-month, pushing the annual rate to 2.9%, the hottest since January. What to make of these mixed signals? Same story as usual – inflation remains a concern, but still way better than it used to be.
2. Labor Market Shows More Cracks– Without getting too deep into the technical weeds, the monthly jobless data numbers are essentially just surveys of businesses. Once a year those numbers are trued up to the actual number of jobs. This week that revision happened and it was a doozy: 911,000 jobs were wiped from the books. The timing on this is important. The period covered the twelve months ended March 2025. That is, before anything relating to tariffs was even a factor. Which means the labor market hasn’t been nearly as good as everyone thought.
3. No One Could Predict Oracle – Oracle announced their latest earnings this week, which included not meeting expectations. But they also announced a deal to acquire a lot of computing power from Nvidia, and the stock absolutely exploded. At one point shares were up 43% in a single day. This is welcome news for anyone who owns Oracle shares (which is almost everyone via index funds, as its heavily weighted). It was also another sign that has me convinced we’re definitely seeing some irrational investing and are currently living in an AI-bubble. More on that in a future letter.
At last, the stage is fully set for September’s Fed meeting. Inflation isn’t gone, but the labor market is flashing warning signs, and growth is slipping faster than anyone expected just weeks ago. The conversation has shifted dramatically: back in June, the question was whether the Fed could even justify a cut this year. Now, markets aren’t just expecting cuts they’re openly debating if Powell will go 25, 50, or even 75 basis points right out of the gate. That kind of speculation would’ve sounded crazy in the spring, but the data makes it increasingly plausible. (I still think 25 is most likely, as bigger cuts are just as likely to spook the market as they are to help it.)
What makes the backdrop even more striking is that stocks are pushing into fresh all-time highs in the middle of this uncertainty. The S&P 500 had a record setting week even though this talk has been persistent. It shows how confident investors are that the Fed will blink and step in with support. That optimism has fueled risk-taking, but it also means markets are leaning hard on the assumption of policy easing. If Powell under-delivers, the disappointment could hit very hard, especially with inflation still sticky in consumer areas like goods and food. It’s a delicate balance: growth is cooling, inflation isn’t gone, and markets are essentially daring the Fed to act boldly.
I’m reminded of this quote from Citi CEO Charles Prince back in 2007: ““When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing.” Basically everyone acknowledges it’s weird to cut rates when the market is at record highs, but at this point there’s still more room to run.
S&P 500 SECTOR SNAPSHOT- Past Week
Top Movers In the Market This Week
