WEEKLY MARKET SUMMARY
Global Equities: US equity markets pulled back from all-time highs but still managed mostly positive returns during the week. The S&P 500 gained 0.4% while the Dow Jones Industrial Average slipped -0.3%. The Nasdaq Composite showed relative strength with a 1.4% weekly advance, while US Small Cap stocks were also outperformers with a 1.1% gain. Developed International stocks ended the week 0.3% higher, while Emerging Markets gained 1.2%.
Fixed Income: US Treasury yields dropped sharply after weak jobs data essentially guaranteed a September rate cut, with the outside chance of a larger, 50 basis point cut now on the table. The US 10-Year Treasury yield declined to 4.08% the lowest level since the April “liberation day” tariff announcement. Investment-grade corporate bonds surged 1.6% during the week, while high yield bonds gained 0.5%.
Commodities: US West Texas Intermediate crude oil fell to under $62 a barrel as OPEC+ agreed to increase output in October. Gold prices rose 4.1% during the week, eclipsing $3,600/oz and pushing the year-to-date gain for gold to 36.7%.
WEEKLY ECONOMIC SUMMARY
Jobs Disaster: The US added just 22,000 jobs in August, falling short of the consensus forecast of 75,000. Following revisions to the prior months, the trailing three-month jobs gain is just 29,000 while the unemployment rate has risen to 4.3%. June jobs data was revised again, from the initial 147,000 gain to now reflect a loss of -14,000 jobs, the first negative print since December 2020. It was the first jobs report since President Trump fired Bureau of Labor Statistics Commissioner Erika McEntarfer in August, hours after the release of disappointing July jobs data. Commerce Secretary Howard Lutnick attempted damage control, stating jobs data will get better in future month because the administration will be firing “the people who are just trying to create noise against the president.”
Supreme Court to decide on Tariffs: The US Court of Appeals issued a 7-4 verdict finding President Trump lacks the legal authority to impose tariffs under the International Emergency Economic Powers Act. The Trump administration is seeking an expedited appeal to the Supreme Court, which means tariffs will remain in place until the nation’s highest court issues a verdict. If the Supreme Court decrees the tariffs are in fact illegal, the government will be forced to refund over $100 billion collected from companies importing goods to the US.
Earnings Wrap-Up: Over 99% of the S&P 500 has now reported third quarter earnings, and by all accounts it was another strong quarter with 81% of the index beating on both revenue and earnings results. Guidance was a mixed bag, with 47 companies issuing negative EPS guidance and 54 citing positive guidance. Artificial Intelligence remained the dominant theme, with 287 companies in the S&P 500 citing “AI” during their earnings calls, including 98% of Technology sector companies. Analysts anticipate US companies will keep the rally going in the fourth quarter, with a projected earnings growth rate of 7.2% to bring the calendar year EPS growth to 10.6%, followed by forecasted EPS growth of 13.6% in 2026.
CHART OF THE WEEK
The Chart of the Week is the ICE US Dollar Index (blue line, left axis), which tracks the value of the US dollar against a basket of 6 foreign currencies, and the NYMEX US Gold Futures Price (gold line, right axis). Investors have grown increasingly bearish on the US dollar this year, primarily due to the $3 trillion of additional debt from the “One Big Beautiful Bill” which was signed into law in July. The “OBBB” includes an anticipated $4.5 trillion in lost tax revenue over the next decade, which is supposed to be replaced by tariffs paid by US companies and consumers. The tariffs have been challenged in courts, however, and may ultimately be refunded if the Supreme Court finds that President Trump overstepped his authority. Investors have sought to diversify away from perceived uncertainty in the US currency and government bonds by taking refuge in the oldest safe-haven asset, gold.
