Weekly Commentary (8/25/2025) - Jackson Hole Sets the Table for September

Last week’s spotlight was Jackson Hole. Chair Jerome Powell acknowledged that “the balance of risks appears to be shifting,” adding that while the labor market is “near maximum employment,” recent slowing means “downside risks to employment are rising.” He reaffirmed the Fed’s 2% inflation goal and described the Committee’s refreshed framework as a return to flexible inflation targeting, signaling policy is now more about balancing cooling inflation with a softer jobs backdrop. Markets read the speech as opening the door to easing next month. 
For the week, the DJIA rose 1.59% and the S&P 500 gained 0.30%, while the NASDAQ slipped 0.55%. Small caps outperformed with the Russell 2000 up 3.32%. International equities were mixed, with MSCI EAFE up 0.84% and MSCI EM down 0.41%. Core bonds firmed; the Bloomberg Aggregate advanced 0.43%. The 10-Year U.S. Treasury yield ended at 4.26% (down 7 bps). Gold rose 1.15% to $3,374.40/oz, and oil climbed 2.71% to $63.66.
Investors now broadly expect the Fed to begin cutting in September, with probabilities near the high-80% range by week’s end, helped by Powell’s tone at Jackson Hole and a run of softer labor indicators. The key question is the path after the first move: a gradual sequence contingent on inflation progress, or a quicker recalibration if growth slows more decisively. 
Looking to the week ahead, two events could test the “September cut” narrative. First, Nvidia reports on Wednesday, August 27, after the close—an earnings release that has often been a bellwether for broader AI-and-semi sentiment. Second, Friday brings the Personal Income & Outlays report (including PCE inflation) for July, the Fed’s preferred inflation gauge. Both arrive just ahead of the September FOMC communications window and could sway rate-cut odds at the margin.
Bottom line: Jackson Hole gave the market what it wanted—permission to believe the Fed is close to easing—while preserving data dependence. With mega-cap earnings (Nvidia) and PCE on deck, markets will soon learn whether last week’s optimism can stick or needs trimming.
“We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.” – Warren Buffett