The Markets

Like walking on cobblestones…

If you’ve ever walked down a road paved with cobblestones, you know the uneven surface can be challenging. Today, financial markets are paved with a variety of challenges and concerns. A recent survey from Charles Schwab found that its clients remain bullish; however, they have concerns about how the political landscape, market valuations, and geopolitical and macroeconomic issues will affect markets over the next three months. They also are considering the possibility of stagflation. (Stagflation is a rare confluence of slow economic growth, high inflation, and high unemployment.)

Last week, markets were volatile. Rising and falling in response to a variety of different events, including:

U.S.- China trade negotiations. President Donald Trump and President Xi Jinping met last week and “Both sides agreed to delay restrictions that formed the center of an escalating tit-for-tat in recent weeks. That de-escalation…took a worst-case scenario off the table for markets, though much of what was agreed upon still has to be worked out in detail,” reported Reshma Kapadia of Barron’s.

A cautionary statement from the Federal Reserve (Fed). Investors were not surprised when the Fed lowered the federal funds rate last week. However, the market wobbled when Fed Chair Jerome Powell emphasized that a December rate cut was not a certainty, reported Joe Weisenthal of Bloomberg. In the post-meeting statement, Chair Powell said:

“Available indicators suggest that economic activity has been expanding at a moderate pace. GDP rose at a 1.6 percent pace in the first half of the year, down from 2.4 percent last year…In the near term, risks to inflation are tilted to the upside and risks to employment to the downside – a challenging situation. There is no risk-free path for policy as we navigate this tension between our employment and inflation goals.”

Third quarter company performance. It’s earnings season, the time when companies tell investors how profitable they were in the previous quarter. In general, companies performed well. “In fact, this quarter marks the 6th consecutive quarter that the S&P 500 is reporting a net profit margin above the 5-year average (12.1 [percent]),” reported John Butters of FactSet.

The caveat is that many stock prices are at levels that require excellent performance. As a result, companies with earnings that were not perfect saw their share prices drop “What is more, companies aren’t getting rewarded as much for good news…FactSet said that the average price increase following a positive earnings surprise so far this quarter is just 0.3 [percent], compared with the five-year average of 0.9 [percent],” reported Paul La Monica of Barron’s.

Just as the right footwear can make walking on cobblestones easier, having a well-allocated and diversified portfolio can make navigating uncertain markets less stressful. Diversification won’t prevent losses, but it can help investors manage portfolio risk.

Amid significant volatility, major U.S. stock indexes moved higher over the week. Broadly speaking, U.S. Treasuries gained value as yields on many maturities ended the week lower than they started it.

Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

WHAT IS AI GOOD FOR? Americans have mixed feelings about artificial intelligence (AI). In September, Brian Kennedy, Eileen Yam, Emma Kikuchi, Isabelle Pula, and Javier Fuentes of Pew Research reported on a September 2025 survey that asked about the risks and benefits of AI for society. The survey found:

· 50 percent of respondents were more concerned than excited about AI being used more frequently in daily life,

· 38 percent were both concerned and excited,

· 10 percent were more excited than concerned, and

· 2 percent did not respond to the question.

Regardless, many Americans are using AI to make informed decisions when buying goods and services. For example, Americans have been turning to AI for help when:

Negotiating a better price for a car. Younger generations are using AI to identify the best times to buy cars (with a focus on price fluctuations, deals, or incentives), reported Eileen Falkenberg-Hull of Newsweek. They’re also using AI to review contracts and negotiate better deals, according to The Economist.

Identifying the best value on a wine menu. Unless you are very knowledgeable about a wide range of wines, it can be challenging to know which bottle on a restaurant menu is well-priced. Now, you can upload a photo of the menu’s wine list and ask AI.

Understanding plumbing and household repair issues. AI may be able to diagnose a problem and suggest a low-cost solution or negotiate a better price with the plumber. A recent survey found that “homeowners who followed AI’s guidance…reported an average 47 [percent] reduction in repair or maintenance costs and 29 [percent] felt less stressed about managing home repairs,” reported Anna Baluch on Realtor.com. She emphasized that it is important to double-check the advice offered by AI before taking action.

“As AI goes mainstream, it will remove one of the most enduring distortions in modern capitalism: the information advantages that sellers, service providers and intermediaries enjoy over consumers. When everyone has a genius in their pocket, they will be less vulnerable to mis-selling—benefiting them and improving overall economic efficiency. The ‘rip-off economy’, in which firms profit from opacity, confusion or inertia, is meeting its match,” reported The Economist.

WEEKLY FOCUS – THINK ABOUT IT

“…an adversarial mindset not only prevents us from understanding and responding to the other party, but also makes us feel like we've lost when we don't get our way.”

The Markets

The economy is all right.

Last week, revised economic figures showed the United States economy grew faster from April through June than previously thought. The upward revision was primarily due to a revised estimate for consumer spending over the period, according to Connor Smith of Barron’s.

“American consumers, the engine of the world's largest economy, have remained resilient in the face of tariffs and economic uncertainty…The continued strength in spending, which has defied worries about a slowdown, is in contrast to recent data showing a weakening labor market…But initial claims for unemployment insurance fell last week to their lowest level since July…in a sign that the jobs market might not be in as dire shape as other data have suggested,” reported Danielle Kay of the BBC.

The contrast between consumer spending and consumer sentiment was striking. Consumer sentiment moved lower again in September and is down more than 21 percent this year, according to the University of Michigan’s Consumer Sentiment Survey.

“Nationally, not only did macroeconomic expectations fall, particularly for labor markets and business conditions, but personal expectations did as well, with a softening outlook for [consumers’] own incomes and personal finances. Consumers continue to express frustration over the persistence of high prices, with 44 [percent] spontaneously mentioning that high prices are eroding their personal finances, the highest reading in a year,” wrote Surveys of Consumers Director Joanne Hsu.

The inflation picture did not improve in August. Prices, as measured by the personal consumption expenditures price index, were up 2.7 percent year over year. When volatile food and energy prices were excluded, prices rose 2.9 percent year over year. Both measures are well above the Federal Reserve’s two percent inflation target.

Last week, major U.S. stock indexes rallied on Friday, but were not able to recoup losses from earlier in the week, reported Sean Conlon of CNBC. Yields moved higher over the week for all but the longest maturities of U.S. Treasuries.

IT’S NOT THE NOBEL PRIZE. “Many scientists dream of winning a Nobel Prize, an accolade that brings worldwide recognition, prestige and a place in the pantheon of greatness alongside the likes of Albert Einstein, Marie Curie and Francis Crick. Then there are the other awards — the Ig Nobel prizes, which were devised to highlight research that makes people laugh, then think,” reported Chris Simms in the journal Nature.

The 35th First Annual Ig Nobel Prize ceremony took place in mid-September. This year’s awards included:

 Peace Prize. Fritz Renner, Inge Kersbergen, Matt Field, and Jessica Werthmann were recognized for investigating the effects of alcohol consumption on foreign language pronunciation among people who have just learned a language. Turns out, having a few drinks improves the foreign language skills of some people – but not their ability to self-rate their skills. The data were published in Dutch Courage? Effects of Acute Alcohol Consumption on Self-Ratings and Observer Ratings of Foreign Language Skills.

 Biology Prize. “Biting flies are the most damaging arthropod pests of cattle worldwide and the economic impact of biting flies on the United States cattle production was estimated at [$2.211 billion] per year,” according to a team of researchers in Japan who studied ways to address the issue. They found that disguising cows as zebras – by painting them with black and white stripes – greatly reduced the number of fly bites.

Engineering Design Prize. Vikash Kumar and Sarthak Mittal took home an Ig for their paper titled, Smelly Shoes – An Opportunity for Shoe Rack Re-Design. The pair explored how stinky shoes affect owner satisfaction with shoe racks in India. They concluded there is market potential for a new type of device with a built-in deodorizer.

Physics Prize. Cacio e pepe is one of those deceptively simple Italian sauces that can be quite challenging to prepare. Researchers from Spain, Italy, Germany, and Austria studied the cooking process to develop a scientific recipe. They explained, “A true Italian grandmother or a skilled home chef from Rome would never need a scientific recipe for Cacio e pepe, relying instead on instinct and years of experience. For everyone else, this guide offers a practical way to master the dish.” The recipe can be found in the paper, Phase behavior of Cacio e pepe sauce.

Prizes also were awarded in the fields of literature, psychology, nutrition, pediatrics, chemistry, and aviation.

WEEKLY FOCUS – THINK ABOUT IT
“The ‘silly’ question is the first intimation of some totally new development.”
– Alfred Whitehead, Mathematician and philosopher

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:

• Restrictive when the federal funds rate is high enough to restrain economic activity and curb inflation.
• Neutral when the federal funds rate is at a level that does not stimulate or restrain the economy.
• 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.

WHAT DO YOU KNOW ABOUT FASHION? The fashion industry is an important part of the global economy. It employs 300 million people and is expected to have global revenue of $2 trillion by 2026, reported Elaine Ritch for Economics Observatory.

Like all industries, fashion has hits and misses. There are trends that shine and trends that perplex. Consider Big Red Boots (BRBs), which were introduced at New York Fashion Week in 2023. The cartoon-style boots looked like they’d been pulled from Mario’s closet and retailed for $350. Their popularity was tempered by suction issues – the grippy rubber boots proved difficult to remove, reported Christian Allaire of Vogue.

See what you know about fashion trends today, and in the past, by taking this brief quiz:

1. The Communist Party reportedly does not approve of the latest fashion trend in China, but demand for a particular type of sun protection gear has been on the rise. What are Chinese women wearing to the beach?
2. 1. Glare goggles
   2. Sunsuits
   3. Shade sleeves
   4. Facekinis

2. People of a certain age may remember platform shoes as a disco-era wardrobe necessity. The 70’s weren’t the first time thick-soled shoes trended, though. In 16^th century Venice, “chopines” – boots with platforms that were up to 20 inches tall – were popular. Theboots were worn to:

1. 1. Strengthen ankles and calves.
   2. Provide protection in combat.
   3. Protect shoes and dresses from muck.
   4. Wade across shallow canals.

3. In the 1960s, dresses made of an unusual material that was printed with geometric patterns became very popular. What were the dresses made of?

1. 1. Polyester
   2. Paper
   3. Chocolate
   4. Vinyl

4. Which of the following is NOT an iconic fashion piece, according to Glam Observer?

1. 1. Little black dresses
   2. Poodle skirts
   3. Denim jeans
   4. Trench coats

WEEKLY FOCUS – THINK ABOUT IT

“The best fashion show is definitely on the street. Always has been and always will be.”
-- Bill Cunningham, Photographer

Answers: 1) d; 2) c; 3) b; 4) b

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.federalreserve.gov/faqs/what-does-the-federal-reserve-mean-when-it-says-monetary-policy-remains-accommodative.htm

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/

https://www.brainyquote.com/authors/bill-cunningham-quotes

The Markets

Was inflation higher, lower, or steady?

Perspective has a tremendous influence on how we perceive the world around us. If you saw any three-dimensional chalk drawings on sidewalks this summer, you understand how perspective affects understanding. When seen from one direction, a chalk drawing looks flat. When seen from another, a winged dragon surges from a hole in the pavement.

Last week, major news sources had varied perspectives on inflation. Here are a few of the headlines we saw:

“Core Inflation Rises to 3.1 [percent]” (Barron’s)

“Inflation holds steady…” (CNN)

“Inflation cools slightly in July from prior month” (Fox Business)

Remarkably, all were correct. The news sources simply highlighted different aspects of the Consumer Price Index (CPI). Here’s what the CPI showed for June and July of this year.

Headline inflation moved slightly lower, on a month-to-month basis (from June to July). It remained steady year over year, which is the 12-month period through July 2025. In contrast, core inflation, which excludes volatile food and energy prices, moved slightly higher on a month-to-month basis (from June to July). It increased year over year.

The Federal Reserve (Fed)’s target for inflation is 2 percent.

The Producer Price Index (PPI) came out last week, too. It tracks how prices have changed for groups that produce and sell goods and services. It was up 3.3 percent in July, year over year, which was higher than June’s 2.4 percent increase.

“U.S. wholesale inflation accelerated in July by the most in three years, suggesting companies are passing along higher import costs related to tariffs. The producer price index increased 0.9 [percent] from a month earlier, the largest advance since consumer inflation peaked in June 2022…,” reported Augusta Saraiva of Bloomberg.

Last week, major U.S. stock indexes continued to rally. U.S. Treasury yields were mixed. Yields for some shorter maturities of Treasuries moved lower, while yields on longer maturities rose.

WHERE ARE INTEREST RATES HEADED? One of the drivers behind the recent stock market rally has been an expectation that the U.S. Federal Reserve (Fed) will respond to softening economic data by lowering the federal funds rate, reported Saeed Azhar, Johann M Cherian and Sanchayaita Roy of Reuters.

Fed rate cuts are intended to stimulate economic growth by making it less expensive to borrow money. When it’s cheaper to borrow, companies’ expenses may fall and profits can increase, lifting stock prices, reported Mary Hall of Investopedia.

After last week’s Consumer Price Index was released, expectations for a September Fed rate cut soared above 90 percent, according to CME FedWatch. “Inflation is still higher than the Federal Reserve would like — but not high enough to stop the central bank from cutting interest rates next month. That’s investors’ takeaway from yesterday’s consumer price index report,” reported Phil Serafino and Edward Bolingbroke of Bloomberg.

The catch is that a Fed rate cut doesn’t always have the intended effect. Sometimes, the Fed reduces or increases the federal funds rate and other interest rates don’t follow suit. Bloomberg Economics Chief Economist Tom Orlick explained:

“Let’s cast our minds back briefly to the early 2000s, to [former Fed Chair] Ben Bernanke and to the famous savings glut hypothesis. So, back then, the Fed was hiking [the federal funds rate] but long-term Treasury rates weren’t going up. Bernanke said it’s because there’s a glut of global savings. All of this money is coming from China and Saudi into the U.S. Treasury market…that situation is reversed and we’re no longer in a world with a savings glut. We’re in a world with a savings shortage. And that means it doesn’t matter who President Trump appoints as the next Fed chair…that savings shortage is going to mean that long-term rates, the 10-year Treasury yield stays high and…we think 4 to 5 percent for the 10-year Treasury is the new normal.”

The 10-year U.S. Treasury note yielded 4.27 percent at the start of last week. By week’s end it was at 4.33 percent.

WEEKLY FOCUS – THINK ABOUT IT
“I don't think there's too much normal out there anymore. Though there's still plenty of average to go around.”
― John David Anderson, Author

Sources:

https://www.barrons.com/livecoverage/inflation-july-cpi-rate-report/card/core-inflation-rises-to-3-1--UD6vxFsucLKhK6pJYSX8  or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/08-18-25-Core-Inflation-Rises-1.pdf

https://www.cnn.com/2025/08/12/economy/us-cpi-consumer-inflation-july

https://www.foxbusiness.com/economy/cpi-inflation-july-2025

https://www.bls.gov/news.release/cpi.nr0.htm

https://www.bls.gov/news.release/archives/cpi_07152025.htm

https://www.richmondfed.org/publications/research/econ_focus/2024/q1_q2_federal_reserve

https://data.bls.gov/timeseries/WPUFD4&output_view=pct_12mths

https://www.bloomberg.com/news/articles/2025-08-14/us-producer-prices-rise-by-most-in-three-years-on-services

https://www.barrons.com/market-data  or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/08-18-25-Barrons-Market-Graphs-9.pdf

https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve&field_tdr_date_value=2025

https://www.reuters.com/world/us/sp-500-nasdaq-hit-new-closing-highs-rate-cut-hopes-2025-08-13/  https://www.investopedia.com/investing/how-interest-rates-affect-stock-market/

https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html  or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/08-18-25-FedWatch-Market-Rate-Probabilities-11.pdf

https://www.bloomberg.com/news/newsletters/2025-08-13/fed-rate-cut-bets-ramping-up-after-inflation-data?srnd=phx-economics-v2  or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/08-18-25-Fed-Rate-Cut-Bets-12.pdf

https://www.bloomberg.com/news/videos/2025-08-07/-the-price-of-money-with-bloomberg-s-tom-orlik-video

https://www.goodreads.com/quotes/search?q=unexpected

The Markets

U.S. companies have been hitting it out of the park!

Earnings season happens four times every year. It’s the period of time when publicly traded companies report how they performed during the previous quarter. So far, in aggregate, the companies in the Standard & Poor’s (S&P) 500 Index have delivered solid results for the second quarter of 2025.

“Overall, 66 [percent] of the companies in the S&P 500 have reported actual results for Q2 2025 to date. Of these companies, 82 [percent] have reported actual EPS [earnings per share] above estimates, which is above the 5-year average of 78 [percent] and above the 10-year average of 75 [percent]. If 82 [percent] is the final number for the quarter, it will mark the largest percentage of S&P 500 companies reporting a positive EPS surprise for a quarter since Q3 2021 (also 82 [percent]),” reported John Butters of FactSet.

While many U.S. companies had an excellent second quarter, economic clouds are shadowing investor optimism.

“Investors are struggling with a contradiction at the heart of the market as stocks move into their toughest months of the year. On the one hand, earnings have been strong. On the other, economic data are showing signs of weakness. How the two variables play out could determine whether the stock market can keep rallying to new highs—or stumbles into an end-of-summer selloff,” explained Martin Baccardax of Barron’s.

Recent economic data show a softening labor market and weaker consumer spending. (Consumer spending is the primary driver of U.S. economic growth.) In addition, activity in the manufacturing and service sectors slowed. Nazmul Ahasan of Bloomberg reported:

“The Institute for Supply Management’s index of services declined last month to 50.1, below all estimates in a Bloomberg survey of economists. Readings above 50 indicate expansion…The data, released Tuesday, paint a picture of a sluggish service economy wrestling with the fallout of higher tariffs, cautious consumers and [policy] uncertainty…The services sector is by far the largest in the U.S. economy, and has helped drive growth this year while the manufacturing industry contracted for five straight months.”

Last week, the major U.S. stock indexes rallied. The Nasdaq Composite Index closed at a record high, while the Standard & Poor’s 500 Index and Dow Jones Industrial Indexes finished the week close to new highs, reported Amalya Dubrovsky , Brett LoGiurato  and Laura Bratton of Yahoo! Finance. U.S. Treasury yields generally moved higher. The 30-year Treasury bond yielding 4.85% at the end of last week.

BURGERNOMICS: A LOOK AT THE BIG MAC INDEX. During the first six months of 2025, the United States dollar delivered its worst performance since 1991. “The U.S. Dollar Index, which measures the value of the greenback against the world’s six most traded currencies, has lost almost 11 [percent] of its value…,” reported Valerio Baselli of Morningstar.

The drop in the U.S. dollar’s value hasn’t made as big a difference as some might have expected – at least when it comes to buying burgers abroad.

Since 1986, The Economist has been using the “Big Mac Index” as a lighthearted way to measure the relative value of currencies across the world. In theory, if currency exchange rates are properly aligned, a burger should cost the same no matter where it is purchased. (This is known as purchasing-power parity.) That’s rarely the case, so the index helps identify which countries’ currencies are overvalued or undervalued.

“Purchasing-power parity suggests that, with a Taiwanese Big Mac costing 78 Taiwanese dollars and an American one $6.01, the currencies’ exchange rate should be the ratio of the two prices. Hence $1 should buy NT$13 [new Taiwan dollars]. In reality, it buys NT$29. The Big Mac index therefore concludes that the Taiwanese dollar is greatly undervalued against the greenback, by some 56 [percent],” explained The Economist.

In July 2025, The Economist updated the Index, comparing the price of a burger in the U.S. to the price overseas. (The price of a burger in the United States rose from $5.79 in January to $6.01 in July.) After the decline in the U.S. dollar, currencies in many Asian countries remained significantly undervalued relative to the dollar. For example, a burger costs:

• 49.8 percent less in Hong Kong than it does in the United States.
• 41.2 percent less in Japan than it does in the United States.
• 41.1 percent less in Indonesia than it does in the United States.
• 38.5 percent less in India than it does in the United States.

In contrast, a burger costs:

• 54.7 percent more in Switzerland than it does in the United States.
• 39.0 percent more in Sweden than it does in the United States.
• 36.1 percent more in the Euro than it does in the United States.
• 31.1 percent more in Britain than it does in the United States.

Overall, European countries have seen their currencies become more expensive when compared to the U.S. dollar, while currencies in China, Japan, Singapore, South Korea, Taiwan and Vietnam remain undervalued relative to the U.S. dollar. “Most are now even cheaper,” according to The Economist.

WEEKLY FOCUS – THINK ABOUT IT
“Every individual… neither intends to promote the public interest, nor knows how much he is promoting it… he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.”
― Adam Smith, Philosopher and economist

Sources:

https://insight.factset.com/sp-500-earnings-season-update-august-1-2025

https://www.barrons.com/articles/stock-market-earnings-data-buy-sell-f3743245?mod=hp_LEDE_C_3 or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/08-11-25-The-Stock-Market-Is-Stuck%20-%202.pdf

https://abcnews.go.com/Business/us-headed-recession-experts-weigh/story?id=124407347

https://www.bloomberg.com/news/articles/2025-08-01/us-manufacturing-contracts-at-fastest-pace-in-nine-months or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/08-11-25-US-Manufacturing-Contracts%20-%204.pdf

https://www.bloomberg.com/news/articles/2025-08-05/us-service-activity-nearly-stagnates-as-employment-contracts or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/08-11-25-US-Service-Activity%20-%205.pdf

https://finance.yahoo.com/news/live/stock-market-today-nasdaq-hits-fresh-record-sp-500-dow-rise-as-wall-street-closes-winning-week-on-high-note-200211215.html

https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve&field_tdr_date_value=2025

https://global.morningstar.com/en-gb/markets/how-low-can-us-dollar-go

https://www.economist.com/interactive/big-mac-index or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/08-11-25-Our-Big-Mac-Index-Shows-How-Burger%20-%209.pdf

https://www.economist.com/finance-and-economics/2025/07/16/our-big-mac-index-will-sadden-americas-burger-lovers or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/08-11-25-Our-Big-Mac-Index-Will-Sadden%20-%2010.pdf

https://www.adamsmith.org/adam-smith-quotes

The Markets

This is not the inflation you’re looking for…

In general, everyone who buys goods or services in the United States would prefer to see prices trend lower – and that’s what happened in the earlier part of this year. Over the last couple of months, though, inflation has begun to creep higher.

Last week, the Consumer Price Index (CPI), a well-known measure of inflation, showed prices moving higher in June. The only goods that did not show price increases in June were new and used vehicles. “Even with only limited signs of increasing effects from tariffs, inflation is once again accelerating in America. The total measure of inflation in June was right in line with expectations on Tuesday, but it was still a significant jump in the wrong direction,” reported Megan Leonhardt of Barron’s.

Here’s a look at how prices have changed this year.

The CPI provides two inflation measures: headline inflation, which shows how all prices changed, and core inflation, which excludes volatile food and energy categories.

Gathering the data for the CPI requires boots on the ground. “Prices are collected each month in 75 urban areas across the country from about 6,000 housing units and approximately 23,000 retail establishments—department stores, supermarkets, hospitals, gas stations, and other types of stores and service establishments,” reported the Bureau of Labor Statistics.

Recently, staff reductions have made it more challenging for the government to complete the monthly inflation survey, reported Matt Grossman of The Wall Street Journal. When hard data is not collected, the staff relies on estimates. In the past, about 10 percent of CPI survey data was estimated, according to economist Torsten Sløk. In May, that number rose to 30 percent – almost one-third of the data in the survey.

Last week, earnings season got off to a good start. John Butters of FactSet anticipates that the Standard & Poor’s 500 Index will report “year-over-year growth in earnings above 9 [percent] for the second quarter.” Strong earnings boosted investor confidence. The Standard & Poor’s 500 Index rose over the week, and the Nasdaq Composite finished at a new record high. However, the Dow Jones Industrial Average ended slightly lower. Yields on shorter maturities of U.S. Treasuries generally moved lower over the week, while yields on longer maturities of U.S. Treasuries moved higher.

ABOUT MONEY AND HAPPINESS…In 2010, Nobel Laureates Daniel Kahneman and Sir Angus Deaton investigated how money influences happiness. They measured as people’s daily sense of emotional well-being and their lifetime sense of accomplishment as proxies for happiness. The pair concluded that, “More money does not necessarily buy more happiness, but less money is associated with emotional pain.” In addition, the emotional benefits of earning more money leveled off when income reached $75,000. (The real median income in the United States was about $66,700 in 2010, according to the U.S. Census Bureau via FRED.)

In 2021, the relationship between money and happiness was revisited by Matthew Killingsworth, a senior fellow at the Wharton School. The study found, “Larger incomes were robustly associated with both greater experienced well-being and greater evaluative well-being…There was no observed plateau in experienced well-being…either around $75,000/y or at any other income level.” (The real median household income in the U.S. was about $79,200 in 2021, according to the U.S. Census Bureau via FRED.)

To try and understand the contradiction in findings, Kahneman and Killingsworth engaged in an adversarial collaboration mediated by Wharton professor Barbara Mellers. After reviewing the data sets, they concluded, “In the low range of incomes, unhappy people gain more from increased income than happier people do. In other words, the bottom of the happiness distribution rises much faster than the top in that range of incomes. The trend is reversed for higher incomes, where very happy people gain much more from increased income than unhappy people do.”

WEEKLY FOCUS – THINK ABOUT IT
“Research is formalized curiosity. It is poking and prying with a purpose.”
― Zora Neale Hurston, Writer and anthropologist