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Market Recap
August 25, 2025
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The Markets
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Will the Fed lower rates?
Last week, in a much-anticipated speech, Federal Reserve (Fed) Chair Jerome Powell said, “In the near term, risks to inflation are tilted to the upside, and risks to employment to the downside—a challenging situation…Nonetheless, with policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance.”
Investors celebrated and financial markets rallied.
“Powell’s speech sparked the strongest cross-asset rally since April…,” reported Rita Nazareth of Bloomberg. On Friday, “The S&P 500 climbed 1.6 [percent], with tech megacaps rebounding. The Russell 2000 of small firms jumped about 4 [percent]. Two-year yields sank 11 basis points to 3.68 [percent]. Traders boosted bets on a Fed cut next month, pricing in an 85 [percent] chance of a move. The dollar fell.”
Monetary policy – the steps the Fed takes to maximize employment and keep prices stable – can be:
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Restrictive when the federal funds rate is high enough to restrain economic activity and curb inflation.
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Neutral when the federal funds rate is at a level that does not stimulate or restrain the economy.
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Accommodative when the federal funds rate is low enough to stimulate economic activity and reduce unemployment.
Recent economic data showing a slowdown in employment and an uptick in inflation complicate the upcoming rate-setting decision, reported Joseph E. Gagnon of the Peterson Institute for International Economics.
When the Fed lowers the federal funds rate, the cost of borrowing moves lower as rates on home equity loans, auto loans, and credit cards typically follow the Fed. Lower borrowing costs may create opportunities for businesses to invest in new ventures and hire more workers. A rate cut also can boost consumer spending, reported Sarah Foster of Bankrate. The exception to this rule is mortgage loans. The rate for 30-year fixed mortgages typically tracks the benchmark 10-year Treasury note.
Last week, after the Fed Chair’s speech, the Dow Jones Industrial Average closed at a record high, and U.S. Treasuries rallied as yields moved lower, reported Karishma Vanjani of Barron’s.
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Sources:
https://www.federalreserve.gov/newsevents/speech/powell20250822a.htm
https://www.bloomberg.com/news/articles/2025-08-21/stock-market-today-dow-s-p-live-updates?srnd=phx-markets or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/08-25-25-Bloomberg-Wall-Street-Has-Best-2.pdf
https://www.investopedia.com/terms/m/monetarypolicy.asp
https://www.piie.com/blogs/realtime-economics/2025/feds-september-dilemma
https://www.bankrate.com/banking/federal-reserve/how-federal-reserve-impacts-your-money/
https://www.fanniemae.com/research-and-insights/publications/housing-insights/rate-30-year-mortgage
https://www.barrons.com/livecoverage/stock-market-news-today-082225/card/dow-marks-first-record-close-of-the-year-as-s-p-500-nabs-new-high-3FEYOjg5CcgmPAwTmvae or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/08-25-25-Barrons-Dow-Markets-First-Record-8.pdf
https://www.economicsobservatory.com/fast-fashion-what-are-the-true-costs
https://www.vogue.com/article/everyone-is-wearing-mschf-big-red-boots or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/08-25-25-Vogue-Why-Is-Everyone-10.pdf https://www.economist.com/business/2025/08/21/chinas-hottest-new-look-the-facekini or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/08-25-25-Chinas-Hottest-New-Look-11.pdf
https://www.bbc.co.uk/bitesize/articles/zd8rvwx
https://glamobserver.com/8-iconic-fashion-pieces-in-the-history-of-fashion/