![\"Early-Cycle](\"https:\/\/www.newsbeep.com\/us\/wp-content\/uploads\/2025\/09\/d9022d_457fbf182d3f40c79d22af0cdc30faa0mv2.png\")
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\nEquity Rally Broadens in August\n<\/p>\n
Despite tariff uncertainty, a slowing consumer, and continued inflation worries, equities posted positive returns in August amid a healthy Q2 earnings season and renewed hopes for interest rate cuts. The S&P 500 Index gained 2% for the month, reaching a new all-time high on August 28th. With the Federal Reserve hinting at near term monetary easing, equity performance broadened in the month. Small-caps (+7.1%) were among the best performers, followed by international developed equites (+4.6%) and US value (+3.4%). Bonds also fared well as 7-10 year US Treasuries gained 1.6%, Treasury Inflation Protected Notes rose 1.5%, and high yield credits were up 1.2%. Aside from crude oil (-6.0%), commodities posted positive returns as silver increased 8.6%, gold was up 5.0%, and broad-based commodities rose 2.0%.<\/p>\n
![\"Exhibit](\"https:\/\/www.newsbeep.com\/us\/wp-content\/uploads\/2025\/09\/Exhibit-1.png\")
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\nFed Chair Powell\u2019s Jackson Hole Speech Leans More Dovish than Expected\n<\/p>\n
At this year\u2019s Jackson Hole symposium, the Federal Reserve acknowledged a shifting in the balance of risks. Chair Powell emphasized that \u201cdownside risks to employment are rising\u201d and noted that with policy already restrictive, the outlook may warrant adjusting the Fed\u2019s stance. Although inflation via July Core PCE (Personal Consumption Expenditures Index) printed 2.9% and increased from June\u2019s 2.8% reading, GDP growth has slowed to 1.4% in the first half of the year and job gains have weakened sharply. Such data likely caused Powell to reiterate that it is a \u201creasonable base case\u201d to assume tariff effects on prices will be short-lived. Markets interpreted his remarks as opening the door to rate cuts, sparking a rally in rate-sensitive stocks and bonds. As of August 31st, markets are pricing in an 86% chance for a 25 bps rate cut at the September FOMC Meeting.<\/p>\n
![\"Exhibit](\"https:\/\/www.newsbeep.com\/us\/wp-content\/uploads\/2025\/09\/Exhibit-2.png\")
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\nDiscretionary Spending Starts to Slow\n<\/p>\n
Recent data show slowing year-over-year growth in consumer spending across tariff-impacted discretionary sectors such as autos, apparel, furniture, and sporting goods. This suggests emerging weakness in discretionary demand that could weigh on overall consumer activity.<\/p>\n
![\"Exhibit](\"https:\/\/www.newsbeep.com\/us\/wp-content\/uploads\/2025\/09\/Exhibit-3.png\")
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\nSmall-Caps Gain Ground on Large-Caps\n<\/p>\n
Small-caps, as measured by the Russell 2000, have recently outperformed their large-cap counterparts in the Russell 1000 by the largest margin this year, driven in part by growing expectations of looser financial conditions ahead.<\/p>\n
![\"Exhibit](\"https:\/\/www.newsbeep.com\/us\/wp-content\/uploads\/2025\/09\/Exhibit-4.png\")
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\nIs Equal Weight Poised to Outperform Market-Cap Weight?\n<\/p>\n
Relative to its cap-weighted counterpart, the equal-weighted S&P 500 Index has fallen to its weakest level in over two decades. This underscores the elevated concentration of market leadership in a handful of mega-cap stocks, with the average company significantly lagging the index.<\/p>\n
![\"Exhibit](\"https:\/\/www.newsbeep.com\/us\/wp-content\/uploads\/2025\/09\/Exhibit-5.png\")
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Early-Cycle Themes Emerging\u2014Is It Time to Leg In?<\/p>\n
The business cycle has started to signal its shift from a late-cycle phase to an early-cycle phase. While monetary policy remains restrictive, Chair Powell\u2019s speech at Jackson Hole opening the door to rate cuts is likely to be an important tailwind to markets. As a result, market participation has begun to broaden with small-caps, mid-caps, banks, and other rate-sensitive areas of the market trending relatively higher than the overall equity market. Moreover, earnings have been broadly resilient, helping to counter softer macro data, and we believe this strength can extend through year-end despite the potential for seasonal volatility in September. Meanwhile, the leadership of gold and Bitcoin highlights the market\u2019s ongoing search for hedges against fiscal expansion and inflation risk, while the rapid advancement of AI represents a powerful structural force that has the potential to shape long-term winners and losers. Against this backdrop, we continue to favor diversified equity exposure while legging into attractive early cycle cohorts, as well as thoughtful inflation and deficit hedges to aid in navigating both near-term risks and longer-term opportunities.<\/p>\n
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