Strong Week for U.S. Stocks Amid Labor Market Weakness
Market Recap for the Week of August 10, 2025
The U.S. stock market posted another strong week, quickly recovering from last Friday’s drop following the weak jobs report. This puts the S&P 500 index at roughly a 9% year-to-date (YTD) return. Utilities, Industrials, and Technology have been the best-performing sectors this year, each up about 15% YTD. The only negative sector is Healthcare, down approximately 5% YTD. Gold has also had an excellent year, gaining nearly 30% YTD. International stocks continue to outperform U.S. stocks, with broad international indexes up about 20% YTD. Certain countries, such as Italy and Germany, have posted YTD gains exceeding 30%.
Expectations for an interest rate cut in September have increased. A month ago, market participants placed the probability of at least one September rate cut at 65%. That probability has now risen to 89%, likely driven by weakness in the labor market. However, the recent increase in tariffs could put upward pressure on inflation, leaving the Federal Reserve in a difficult position. On one hand, they should be cutting rates if the labor market continues to weaken; on the other hand, if inflation remains above target, they shouldn’t be cutting. The question is: which mandate will the Fed prioritize—full employment or stable prices?
“Stocks bounced back strongly, but the Fed faces a tough choice between supporting employment and controlling inflation.”
Chart of The Week
Our chart of the week once again illustrates how dysfunctional the housing market is. This data, sourced from Redfin, estimates the number of buyers and sellers in the real estate market. Going back to Economics 101, prices of a good or service should be driven by supply and demand—in other words, how many people are buying and how many are selling. If more people are selling than buying, prices should generally fall. However, housing prices tend to adjust more slowly than those of other assets, such as stocks, which can move much more quickly. Bottom line: the data suggests home prices should be falling—how much they will fall remains to be seen.
The commentary in this blog is for informational purposes only and should not be taken as personalized investment advice
Chart Source: https://www.redfin.com/news/sellers-vs-buyers-price-impact/
