Weekly Market Update

Market Recap

Last week was marked by mixed results, with the S&P 500 (^GSPC) falling just below flatline, while the Dow Jones Industrial Average (^DJI) declined nearly 0.1%. The tech-heavy Nasdaq Composite (^IXIC) eked out slight gains.

The meeting between Volodymyr Zelensky and European allies with President Trump in Washington, D.C., has added to market uncertainty, but investors were also looking to Powell's speech on Friday. His comments will likely provide clues to the path of monetary policy after inflation and retail data prompted Wall Street to temper rate cut hopes.

Key Takeaways

1. Tariffs and Inflation: Businesses are currently absorbing most of the incremental costs from higher tariffs, which is a headwind for profit margins. However, analysts expect consumers to eventually bear most of the costs through higher prices.
2. Earnings Season: Q2 earnings season has been mostly positive, with 81% of S&P 500 companies reporting positive earnings per share surprises and revenue surprises.
3. Fed Meeting: Powell's speech at Jackson Hole will be closely watched for clues to the path of monetary policy. The Fed's July meeting minutes showed broad support for holding rates steady, despite a growing divide among policymakers.
4. Rate Cut Hopes: Dimmed rate-cut hopes are weighing on minds after minutes from the Fed's July meeting signaled that sticky inflation rather than a faltering labor market is the main concern for policymakers.

Investment Outlook

With the stock market at record highs and growth slowing, investors should be cautious of underlying risks. Goldman Sachs warns that a key factor behind the markets' stability has been a volatility reset, which could quickly turn into a storm if growth slows or the Fed tightens monetary policy.