Executive Summary
The 2025 Jackson Hole Economic Policy Symposium will focus on “Labor Markets in Transition: Demographics, Productivity, and Macroeconomic Policy.” The symposium is scheduled for August 21-23. It’s an annual event hosted by the Federal Reserve Bank of Kansas City in Jackson Hole, Wyoming, bringing together central bankers, policymakers, economists, and academics to discuss important economic issues and long-term policy challenges.
Fed Chair Jerome Powell will speak at 10 a.m. on Friday, August 22. His speech is titled “Economic Outlook and Framework Review.” So he will likely discuss the current controversies about the economy, the labor market, inflation, and how the Fed should respond to them. Will he turn more dovish in reaction to July’s weak jobs report? Or will he remain hawkish by reiterating that the Fed is in no rush to cut the federal funds rate because inflation remains about a percentage point above the Fed’s 2.0% y/y inflation target?
We believe he will continue to wait and watch the data. In other words, he’ll say that a Fed rate cut is possible at the September meeting, but the Fed’s decisions are data-dependent.
Equities
Last week, the S&P 500 returned +1.0%. The index rose to an all-time high mid-week as a gauge of consumer inflation (CPI) met expectations and markers boosted the odds of a rate cut in September. However, later in the week, a producer inflation gauge (PPI) rose well above expectations, and weak consumer sentiment gave markets reasons to pause on optimism around rate cuts and the economy. Mid cap (+1.4%) and small cap (+3.1%) stocks fared better than large caps. Healthcare (+4.6%) and consumer discretionary (+2.5%) were the best performing sectors in the S&P 500; utilities (-0.7%) and consumer staples (-0.7%) were the laggards. EAFE markets returned +2.4% with Japan (+4.0%) leading, while EM markets returned +1.6% with gains across all major geographies.
From a valuation perspective, the S&P 500, the NASDAQ, and EM trade at or above +1 standard deviation based on historical forward P/E ratios, with the S&P 500 at +2.1, the NASDAQ at +1.4, and EM at +1.3. For the next 12 months, EPS growth for S&P 500 is expected to be 7.8% (vs. 6.9% annualized over the last 20 years). For the next 12 months, EPS growth for NASDAQ is expected to be 11.8% (vs. 10.7% annualized over the last 20 years). Equities across markets caps in the U.S., and in non-U.S. developed and emerging markets, trade at or above their 20-year averages based on forward P/E ratios.
Fixed Income
Investment grade fixed income sectors had mixed returns as yields rose at the long end of the curve, offsetting spread compression. Municipals returns were flat, US AGG returns were flat, and US IG returned +0.2%. HY bonds returned +0.3% as spreads compressed 4bps while bank loans returns were flat. EM debt returned +0.7% even while the U.S. dollar fell 0.3% as spreads compressed 12bps.
Rates
Rates rose at the long end of the curve. The recession-watch 3M-10Y spread widened 6bps and remains positive at +9. The 2Y-10Y spread widened 4bps to +56. Rates rose in other developed markets; the BTP-Bund spread is at 0.80%. 5-year breakeven inflation expectations fell 2bps to 2.45% (vs. low of 1.88% on Sept 10); 10-year breakeven inflation expectations fell 1bp to 2.39% (vs. recent low of 2.03% on Sept 10); the 10Y real yield rose 5bps to 1.94%. The market now expects two cuts in 2025 vs the Fed’s guidance of two cuts. At year-end 2025, the market expects the Fed Funds rate to be 3.81% vs. the Fed’s guidance of 3.75%-4.00%.
Currencies/Commodities
The dollar index fell 0.3%. The commodities complex fell 0.5% as energy prices fell 1.5% for the week. Brent prices fell 1.1% to $66/bbl amid hopes of an end to the war in Ukraine. US natural gas prices fell 2.5% while European gas fell 3.9%.
Market monitors
Volatility was flat for equities and fell slightly for bonds (VIX = 15, MOVE = 77); the 10-year average for each is VIX=19, MOVE = 80. Market sentiment (at midweek) fell from -8 to -16, reflecting weak consumer sentiment.
Weekly Commentary
Investment Commentary – August 18, 2025
Stuart Katz
Executive Summary
The 2025 Jackson Hole Economic Policy Symposium will focus on “Labor Markets in Transition: Demographics, Productivity, and Macroeconomic Policy.” The symposium is scheduled for August 21-23. It’s an annual event hosted by the Federal Reserve Bank of Kansas City in Jackson Hole, Wyoming, bringing together central bankers, policymakers, economists, and academics to discuss important economic issues and long-term policy challenges.
Fed Chair Jerome Powell will speak at 10 a.m. on Friday, August 22. His speech is titled “Economic Outlook and Framework Review.” So he will likely discuss the current controversies about the economy, the labor market, inflation, and how the Fed should respond to them. Will he turn more dovish in reaction to July’s weak jobs report? Or will he remain hawkish by reiterating that the Fed is in no rush to cut the federal funds rate because inflation remains about a percentage point above the Fed’s 2.0% y/y inflation target?
We believe he will continue to wait and watch the data. In other words, he’ll say that a Fed rate cut is possible at the September meeting, but the Fed’s decisions are data-dependent.
Equities
Last week, the S&P 500 returned +1.0%. The index rose to an all-time high mid-week as a gauge of consumer inflation (CPI) met expectations and markers boosted the odds of a rate cut in September. However, later in the week, a producer inflation gauge (PPI) rose well above expectations, and weak consumer sentiment gave markets reasons to pause on optimism around rate cuts and the economy. Mid cap (+1.4%) and small cap (+3.1%) stocks fared better than large caps. Healthcare (+4.6%) and consumer discretionary (+2.5%) were the best performing sectors in the S&P 500; utilities (-0.7%) and consumer staples (-0.7%) were the laggards. EAFE markets returned +2.4% with Japan (+4.0%) leading, while EM markets returned +1.6% with gains across all major geographies.
From a valuation perspective, the S&P 500, the NASDAQ, and EM trade at or above +1 standard deviation based on historical forward P/E ratios, with the S&P 500 at +2.1, the NASDAQ at +1.4, and EM at +1.3. For the next 12 months, EPS growth for S&P 500 is expected to be 7.8% (vs. 6.9% annualized over the last 20 years). For the next 12 months, EPS growth for NASDAQ is expected to be 11.8% (vs. 10.7% annualized over the last 20 years). Equities across markets caps in the U.S., and in non-U.S. developed and emerging markets, trade at or above their 20-year averages based on forward P/E ratios.
Fixed Income
Investment grade fixed income sectors had mixed returns as yields rose at the long end of the curve, offsetting spread compression. Municipals returns were flat, US AGG returns were flat, and US IG returned +0.2%. HY bonds returned +0.3% as spreads compressed 4bps while bank loans returns were flat. EM debt returned +0.7% even while the U.S. dollar fell 0.3% as spreads compressed 12bps.
Rates
Rates rose at the long end of the curve. The recession-watch 3M-10Y spread widened 6bps and remains positive at +9. The 2Y-10Y spread widened 4bps to +56. Rates rose in other developed markets; the BTP-Bund spread is at 0.80%. 5-year breakeven inflation expectations fell 2bps to 2.45% (vs. low of 1.88% on Sept 10); 10-year breakeven inflation expectations fell 1bp to 2.39% (vs. recent low of 2.03% on Sept 10); the 10Y real yield rose 5bps to 1.94%. The market now expects two cuts in 2025 vs the Fed’s guidance of two cuts. At year-end 2025, the market expects the Fed Funds rate to be 3.81% vs. the Fed’s guidance of 3.75%-4.00%.
Currencies/Commodities
The dollar index fell 0.3%. The commodities complex fell 0.5% as energy prices fell 1.5% for the week. Brent prices fell 1.1% to $66/bbl amid hopes of an end to the war in Ukraine. US natural gas prices fell 2.5% while European gas fell 3.9%.
Market monitors
Volatility was flat for equities and fell slightly for bonds (VIX = 15, MOVE = 77); the 10-year average for each is VIX=19, MOVE = 80. Market sentiment (at midweek) fell from -8 to -16, reflecting weak consumer sentiment.
Disclosure and Source
Investment Commentary Sources: Bloomberg. Investment advisory services offered through Robertson Stephens Wealth Management, LLC (“Robertson Stephens”), an SEC-registered investment advisor. Registration does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. This material is for general informational purposes only and should not be construed as investment, tax or legal advice. It does not constitute a recommendation or offer to buy or sell any security, has not been tailored to the needs of any specific investor, and should not provide the basis for any investment decision. Please consult with your Advisor prior to making any Investment decisions. The information contained herein was carefully compiled from sources believed to be reliable, but Robertson Stephens cannot guarantee its accuracy or completeness. Information, views and opinions are current as of the date of this presentation, are based on the information available at the time, and are subject to change based on market and other conditions. Robertson Stephens assumes no duty to update this information. Unless otherwise noted, any individual opinions presented are those of the author and not necessarily those of Robertson Stephens. Indices are unmanaged and reflect the reinvestment of all income or dividends but do not reflect the deduction of any fees or expenses which would reduce returns. Past performance does not guarantee future results. Forward-looking performance targets or estimates are not guaranteed and may not be achieved. Investing entails risks, including possible loss of principal. Alternative investments are only available to qualified investors and are not suitable for all investors. Alternative investments include risks such as illiquidity, long time horizons, reduced transparency, and significant loss of principal. This material is an investment advisory publication intended for investment advisory clients and prospective clients only. Robertson Stephens only transacts business in states in which it is properly registered or is excluded or exempted from registration. A copy of Robertson Stephens’ current written disclosure brochure filed with the SEC which discusses, among other things, Robertson Stephens’ business practices, services and fees, is available through the SEC’s website at: www.adviserinfo.sec.gov. © 2025 Robertson Stephens Wealth Management, LLC. All rights reserved. Robertson Stephens is a registered trademark of Robertson Stephens Wealth Management, LLC in the United States and elsewhere.
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