08/25/25
Jerome Powell's speech at the Jackson Hole Economic Symposium sent stocks soaring higher on Friday as he said the Federal Reserve could begin cutting interest rates at next month's FOMC meeting. He didn't say they will cut rates, but that they could. It was quite a positive reaction and it was enough to quickly recover the losses from the 5-day pullback leading up to the speech. Bonds also rallied sharply on the new outlook.
(The most current commentary is always posted here: www.tsptalk.com/comments.php)
Last week we saw the odds of an interest rate cut drop to about 75% from a number over 90% at one time on the CME group website, and the stock market started to get concerned and that helped trigger a 5-day losing streak for the S&P 500.
Powell's new more dovish outlook suggested to investors that they are no longer data dependent, but instead see the evidence of the need for a cut, although nothing is official yet. I always found it a little troubling that one human being can have this much influence on the markets. His remarks were subtle but powerful.
Ironically, the weak jobs report sent stocks sharply lower on Aug 1, and now the market is rallying because the Fed said the labor market may be getting weak enough to cut rates. The big rally took the S&P 500 back to where it was the prior week, erasing the losses of the 5-day pullback as the odds of a cut are back to about where they were a week ago.
The S&P 500 / C-fund successfully tested in a very convenient area last week as the bottom of the ascending channel held for a couple of days before Friday's rally so technically the charts remains in good shape. I had been anticipating some kind of pullback in late July and into August but so far the two declines that we have seen during that time have not been the type I have been expecting. It's semantics, but I would consider these tests of the lower end of the channel as "dips", not pullbacks. I would consider a pullback at least 3%, and up to to 9%. 10% would be a correction.
Being near the all time highs with the chart starting in the bottom left and ending in the top right reminds us that this is a strong bull market and getting too defensive can cost us, but the fundamentals don't look quite as good so we have to make decisions about how much further this rally can go without one of those meaningful pullbacks or a correction. The new highs at Friday's candlestick is a candidate for a retracement at some point, but there may be plenty of investors who find themselves underinvetested and needing to get more money into the market, which could keep stocks buoyant a while longer. That is if some news does not come out that refutes Powell assertion that rates are coming down in September.
I figured a test of the 50-day EMA would be more technically satisfying, so now that it is back near its all time highs, while looking bullish, the S&P is still at historically high valuations as the rally off the April lows continues without much backing and filling, except for the occasional hiccup.
The new dovish outlook sent the 10-year Treasury Yield down sharply and the descending trend continues with support near 4.2%.
Late last week I said something brilliant like the dollar chart is starting to look more bullish to me. Bam! That was quickly proven wrong, although technically it is still were it was several days ago. It's where it goes from here, right on the 50-day EMA, that will count, and it has held above that average for a month now.
The Dow Transportation Index bounced back from its 2-day sell off and while it seems to have an issue with the upper resistance of that bearish looking flag, the trajectory has been patiently moving higher for months.
There is still plenty of inflation data like the PCE prices data coming out on Friday of this week, plus a jobs report in early September that could change things for the Fed - updated GDP numbers, PMI data, Michigan Consumer Sentiment Data, and New Home Sales this morning to name some, but right now investors are of the mind that this rate cut is coming. We all kind of knew it was coming it was just a matter of whether we were 75% sure, 95% sure, or somewhere in between, but it is certainly not a surprise.
The futures opened up near flat on Sunday evening, but Monday and Tuesday could be a battle between mom and pop investors who saw over the weekend what the market did on Friday and might feel the need to buy more stocks, and potential profit takers who saw Friday as an overreaction to news that seemed inevitable - a September rate cut.
The DWCPF / S-fund had a monstrous day gaining over 3% on Friday, pushing it to a new high for the year, although still off its all time highs made last year. Lower interest rates are very advantageous to smaller companies, and that's why they outperformed so much although, as we talked about above, the odds of a cut are no different than they had been in the weeks before Powell spoke on Friday. It looks like a bullish chart but resistance is overhead, although that resistance is rising.
ACWX (I-fund) had a big day but maybe not as big as we might have expected considering a 1% decline in the dollar on Friday. This chart just keeps on keeping on, and I know I have been avoiding it because it's been too extended, and it looked like the dollar was trying to bottom. I may be wrong on both accounts, but we'll see what the reaction is early this week to Friday's big gains.
BND (bonds / F-fund) rallied strongly and it too is testing its recent highs. Bond prices go higher when yields are falling and the Fed sent those yield lower on Friday. There's resistance in the area, but there usually is when a chart is at its highs.
Thanks so much for reading! We'll see you back here tomorrow.
Tom Crowley
Read more in today's TSP Talk Plus Report. We post more charts, indicators and analysis, plus discuss the allocations of the TSP and ETF Systems. For more information on how to gain access and a list of the benefits of being a subscriber, please go to: www.tsptalk.com/plus.php
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The legal stuff: This information is for educational purposes only! This is not advice or a recommendation. We do not give investment advice. Do not act on this data. Do not buy, sell or trade the funds mentioned herein based on this information. We may trade these funds differently than discussed above. We may use additional methods and strategies to determine fund positions.
Jerome Powell's speech at the Jackson Hole Economic Symposium sent stocks soaring higher on Friday as he said the Federal Reserve could begin cutting interest rates at next month's FOMC meeting. He didn't say they will cut rates, but that they could. It was quite a positive reaction and it was enough to quickly recover the losses from the 5-day pullback leading up to the speech. Bonds also rallied sharply on the new outlook.
(The most current commentary is always posted here: www.tsptalk.com/comments.php)
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Last week we saw the odds of an interest rate cut drop to about 75% from a number over 90% at one time on the CME group website, and the stock market started to get concerned and that helped trigger a 5-day losing streak for the S&P 500.
Powell's new more dovish outlook suggested to investors that they are no longer data dependent, but instead see the evidence of the need for a cut, although nothing is official yet. I always found it a little troubling that one human being can have this much influence on the markets. His remarks were subtle but powerful.
Ironically, the weak jobs report sent stocks sharply lower on Aug 1, and now the market is rallying because the Fed said the labor market may be getting weak enough to cut rates. The big rally took the S&P 500 back to where it was the prior week, erasing the losses of the 5-day pullback as the odds of a cut are back to about where they were a week ago.
The S&P 500 / C-fund successfully tested in a very convenient area last week as the bottom of the ascending channel held for a couple of days before Friday's rally so technically the charts remains in good shape. I had been anticipating some kind of pullback in late July and into August but so far the two declines that we have seen during that time have not been the type I have been expecting. It's semantics, but I would consider these tests of the lower end of the channel as "dips", not pullbacks. I would consider a pullback at least 3%, and up to to 9%. 10% would be a correction.
Being near the all time highs with the chart starting in the bottom left and ending in the top right reminds us that this is a strong bull market and getting too defensive can cost us, but the fundamentals don't look quite as good so we have to make decisions about how much further this rally can go without one of those meaningful pullbacks or a correction. The new highs at Friday's candlestick is a candidate for a retracement at some point, but there may be plenty of investors who find themselves underinvetested and needing to get more money into the market, which could keep stocks buoyant a while longer. That is if some news does not come out that refutes Powell assertion that rates are coming down in September.
I figured a test of the 50-day EMA would be more technically satisfying, so now that it is back near its all time highs, while looking bullish, the S&P is still at historically high valuations as the rally off the April lows continues without much backing and filling, except for the occasional hiccup.
The new dovish outlook sent the 10-year Treasury Yield down sharply and the descending trend continues with support near 4.2%.
Late last week I said something brilliant like the dollar chart is starting to look more bullish to me. Bam! That was quickly proven wrong, although technically it is still were it was several days ago. It's where it goes from here, right on the 50-day EMA, that will count, and it has held above that average for a month now.
The Dow Transportation Index bounced back from its 2-day sell off and while it seems to have an issue with the upper resistance of that bearish looking flag, the trajectory has been patiently moving higher for months.
There is still plenty of inflation data like the PCE prices data coming out on Friday of this week, plus a jobs report in early September that could change things for the Fed - updated GDP numbers, PMI data, Michigan Consumer Sentiment Data, and New Home Sales this morning to name some, but right now investors are of the mind that this rate cut is coming. We all kind of knew it was coming it was just a matter of whether we were 75% sure, 95% sure, or somewhere in between, but it is certainly not a surprise.
The futures opened up near flat on Sunday evening, but Monday and Tuesday could be a battle between mom and pop investors who saw over the weekend what the market did on Friday and might feel the need to buy more stocks, and potential profit takers who saw Friday as an overreaction to news that seemed inevitable - a September rate cut.
The DWCPF / S-fund had a monstrous day gaining over 3% on Friday, pushing it to a new high for the year, although still off its all time highs made last year. Lower interest rates are very advantageous to smaller companies, and that's why they outperformed so much although, as we talked about above, the odds of a cut are no different than they had been in the weeks before Powell spoke on Friday. It looks like a bullish chart but resistance is overhead, although that resistance is rising.
ACWX (I-fund) had a big day but maybe not as big as we might have expected considering a 1% decline in the dollar on Friday. This chart just keeps on keeping on, and I know I have been avoiding it because it's been too extended, and it looked like the dollar was trying to bottom. I may be wrong on both accounts, but we'll see what the reaction is early this week to Friday's big gains.
BND (bonds / F-fund) rallied strongly and it too is testing its recent highs. Bond prices go higher when yields are falling and the Fed sent those yield lower on Friday. There's resistance in the area, but there usually is when a chart is at its highs.
Thanks so much for reading! We'll see you back here tomorrow.
Tom Crowley
Read more in today's TSP Talk Plus Report. We post more charts, indicators and analysis, plus discuss the allocations of the TSP and ETF Systems. For more information on how to gain access and a list of the benefits of being a subscriber, please go to: www.tsptalk.com/plus.php
Questions, comments, or issues with today's commentary? We can discuss it in the Forum.
Daily Market Commentary Archives
For more info our other premium services, please go here... www.tsptalk.com/premiums.php
To get weekly or daily notifications when we post new commentary, sign up HERE.
Posted daily at www.tsptalk.com/comments.php
The legal stuff: This information is for educational purposes only! This is not advice or a recommendation. We do not give investment advice. Do not act on this data. Do not buy, sell or trade the funds mentioned herein based on this information. We may trade these funds differently than discussed above. We may use additional methods and strategies to determine fund positions.
