August 2025 Recap

The Economy

Macro Calm, Fed on Track

US August economic data delivered a backdrop of stable inflation and modestly softer growth, keeping the Fed on course for a 25-basis-point cut at its next meeting. Inflation measures came in about as expected across income, spending, and core PCE, the Fed’s preferred inflation measure, an unusually clean set of reports that removed any near-term surprise risk. The one outlying number was July’s trade deficit, which widened to $104B versus the $90B consensus. The increased deficit will shave a few tenths off Q3 GDP estimates, though forecasts remain strikingly dispersed: Goldman Sachs’ forecast is for 1.7% while JP Morgan is at 2.5%, even with two-thirds of the quarter already complete. With inflation risk sidelined for now, this Friday’s jobs report becomes the key data point. Unemployment claims remain orderly, and a payroll gain of nearly 60–70k would validate the Fed’s measured stance. Only a negative print alongside a clear rise in unemployment could bring a 50-basis-point move into play. Chairman Powell has been explicit that tariff-related inflation noise is not the inflation the Fed is targeting.  Rather, the labor market—wages, hours, and breadth of hiring—remains the decisive input the Fed is monitoring.

The Markets

Equities Still Driven by Quality

Despite a sharp sell-off on the final trading day of the month, U.S. equities finished their fourth consecutive month of gains, with the S&P 500 up 2% in August. While tariff-related uncertainty and geopolitical tensions continued to weigh on the market, optimism surrounding potential upcoming Federal Reserve rate cuts and Big Tech strength helped propel the S&P to a new all-time closing high on August 28.  The rally broadened in August, with mid and small caps outperforming large caps. Mid-cap and small-cap stocks gained 3% and 7%, respectively, as Fed Chair Powell’s dovish remarks during the Jackson Hole symposium reignited hopes for Fed rate cuts.  Most sectors posted gains, led by Materials and Health Care, the latter of which reversed its losses from July. The Utilities sector was the sole decliner.

Equities remain in an uptrend, but participation is uneven. Retail companies’ earnings calls highlighted tariff-driven margin pressure, with many corporate executives now expecting a 10–15% greater hit than previously forecast. This uncertainty leaves small caps in a “prove-it” phase despite the tailwind from lower yields and keeps the burden of proof on tariff-exposed sectors and weaker balance sheets. Meanwhile, mega-cap tech stocks continue to lead. AI demand has cooled from “blistering” to merely “outstanding” but remains a powerful earnings driver. Rising long yields abroad are unlikely to disrupt this favorable backdrop, as cross-border yield differences tend to affect the dollar exchange rate rather than pulling U.S. rates higher. Domestic longer-term high-quality bonds still serve as a valuable hedge if growth slows, keeping demand for Treasuries firm. On the whole, equity trends are positive, but quality and balance-sheet strength remain the market’s preferred categories of stocks.

Positioning Summary: We continue to favor quality large caps with durable earnings power and healthy balance sheets, while keeping selective exposure to small caps only where margin resilience and quality are clear. Maintaining some high-quality medium-duration bonds remains prudent as a portfolio hedge against potential labor-market-driven growth downside.

Wealth Planning

Imposter Scams

Recently, I received a phone call with the caller ID indicating that the call was coming from Bank of America. The caller left a message with an 866 number as a callback and stated that there was something wrong with a credit card I have with them, and to please call back. 

Immediately, I knew this was a fake caller just trying to steal money from me. My number one rule is that you never call back any 866 number left in a message from a bank. I only use the numbers on the back of my debit and credit cards. 

Thankfully, the next day, this “Bank of America” caller tried again, and I decided to answer this bogus call. However, what amazed me was that they knew the last four digits on a credit card. They claimed I was delinquent and that it was being sent to a collection agency. I thanked them for this information and told them I knew they were a scam. I always finish one of these calls by asking the person on the other side the following: ‘Is your grandmother proud of what you do?’

My basic rules:

1. Be skeptical when receiving calls like this. Do not rely on caller ID
2. Only call the phone numbers on your debit/credit cards.
3. Never give any personal or account information to a random caller.
4. Never allow the caller to gain access to your computer. 
5. Never send a payment to anyone calling you.

Here are two links: one from Bank of America and the other from Wells Fargo. 

Here are links from our custodians: Fidelity and Schwab