August 11, 2025

“An economist is an expert who will know tomorrow why the things he predicted
yesterday didn’t happen today.”

 Laurence J. Peter

A fitting quote as most economists who predicted doom and gloom due to the tariffs are wrong again. But first here are the good numbers from last week. The S&P 500 gained 1.88%, the Dow Jones Industrial Average added 1.03%, Nasdaq led up 2.86%. Internationally, the FTSE 100 gained .30% and the MSCI-EAFE added 1.76%. The 2-Year Treasury yield ended the week at 3.762% and the 10-Year paid 4.285%.

So, what happened? Stocks ended the week on a high note, with the S&P 500 climbing about 0.8% and the Nasdaq up roughly 0.9% to fresh all-time highs, while the Dow added 243 points, or 0.6%. Technology names led the charge, as investors piled into semiconductor and AI-related stocks. Nvidia again topped the list of most-active issues on the Nasdaq, underscoring the market’s laser focus on chipmakers powering next-generation applications. The final big batch of companies within the S&P 500 to report mostly strong financial results for the second quarter. Still, many have warned that current tariffs could cut into their profits. (see quote above) “Equity markets delivered an impressive rebound from last week’s decline, with investors shrugging off labor market worries and a fresh round of tariffs,” said Mark Hackett, chief market strategist at Nationwide, in emailed comments last Friday. He pointed to “resilient” corporate earnings and the prospect of interest-rate cuts by the Federal Reserve as offsetting concerns about cracks in the U.S. labor market.

Last week also showed some fireworks as the “Tarriff Diplomacy” continues.

The Wall Street Journal reported, Tokyo’s Nikkei 225 index surged 2.2% following the resolution of tariff concerns between the U.S. and Japan, bringing it close to a record high. Other Asian markets mostly declined, with Hong Kong’s Hang Seng falling 0.7% and South Korea’s Kospi dropping 0.7% as declines on Wall Street influenced market sentiment. U.S. tariffs on Japanese goods had discrepancies that Japan’s trade envoy claims the U.S. has agreed to correct. Disappointing U.S. jobs data and concerns about the impact of tariffs on the economy may be offset by expectations for Federal Reserve interest rate cuts and stronger-than-expected corporate profits.

Some action in commodities found Natural-gas pipelines and midstream operators have rallied as cloud giants expand capacity around the clock, prompting some investors to hedge broader equity risk with high-yield dividend stocks. Commodities also joined the rally in a sign of broadening optimism. Brent crude flirted with $64 a barrel, and gold topped $1,730 per ounce on safe-haven buying. Industrial metals like copper rose alongside lumber, reflecting hopes for sustained global growth even as traders brace for the next phase of central-bank policy decisions.

What’s the FED up to? Fed Chair Jerome Powell, though, has been under increasing pressure from Trump to cut interest rates. Policy decisions aren’t made solely by the Fed chair. All 12 members of the Federal Open Market Committee voted on interest rate changes. Trump has an opportunity to exert more control over the Fed following his nomination of Stephen Miran to a vacancy on the Fed’s board of governors. Miran is a top economic adviser to Trump and is a near-certain vote in support of lower interest rates. The Fed’s last decision to hold interest rates steady included two votes to lower interest rates. Its next meeting is in September, and Wall Street is overwhelmingly betting that the central bank will cut interest rates by a quarter of a percentage point. The expectation for an interest rate cut follows a series of signals last week that the economy could be weakening. That included reports showing that inflation edged higher in June and employers in the U.S. hit the brakes on hiring in July.

Both are key concerns for the Fed, which has been trying to cool inflation down to its target rate of 2% while also fulfilling its “full employment” mandate. Wall Street and the Fed will get more insight next week into inflation’s temperature and the economy. The government will release updates on inflation at both the consumer and wholesale levels, along with a report on retail sales.

The labor market? The number of Americans filing for jobless benefits rose modestly last week, a sign that employers still retaining workers despite economic uncertainty related to U.S. trade policy. Jobless claims for the week ending Aug. 2 rose by 7,000 to 226,000, the Labor Department reported Thursday, slightly more than the 219,000 new applications that economists had forecasted.

Finally, there was a lot of noise coming from Washington, D.C., this week, but the stock market took it all in stride. The Big news was President Donald Trump announced he will meet with Russian President Vladimir Putin in Alaska on Aug. 15 as part of an effort to bring the war in Ukraine to a close. “The highly anticipated meeting between myself, as President of the United States of America, and President Vladimir Putin, of Russia, will take place next Friday, August 15, 2025, in the Great State of Alaska,” he announced on Truth Social on Aug. 8.  Any breakthrough on the Ukrainian war would be well received by Wall Street. Not to mention European Markets.

As the summer winds down, the tailwinds of effective economic policies, trade, US Investment, and tariffs continue to push this market higher, it will bode well for a good 2025.

Mike