Economic Trends and Market Highlights – August 18
IN THIS WEEK’S RECAP: INFLATION, EMPLOYMENT, AND FED IMPACTS
WEEKLY ECONOMIC UPDATE
Presented by The PensionmarkMeridien Team, August 19, 2025
MARKET RECAP
Markets are hitting record highs, but inflation and policy uncertainty are tempering expectations for near-term rate cuts. Amid a busy end to the summer, below are the top takeaways from the last week.
STOCK INDEX PERFORMANCE
The markets showed positive momentum last week, with the S&P 500 rising by 0.94%, the NASDAQ 100 gaining 0.43%, and the Dow Jones Industrial Average climbing by 1.74%.
INFLATION PRESSUER
Headline inflation held steady at 2.7% in July, surprising forecasters as tariffs had only a modest effect on consumer prices. Falling energy costs also offered relief at the gas pump. Beneath the surface, however, core inflation rose to 3.1%, its highest level since winter, driven by rising costs for goods and services such as used cars and medical care. While tariffs have not yet caused significant price increases in autos or appliances, economists caution that inflationary pressures in other key categories suggest the impact of tariffs and broader cost trends may be spreading.
LABOR MARKET
The unemployment rate remains relatively low at 4.2%, but slowing payroll growth and weaker job creation are fueling speculation that the Federal Reserve may eventually cut rates to support employment, even as inflation lingers. In regions heavily affected by tariffs and in industries facing higher input costs, including manufacturing and construction, employers are showing restraint in wage increases and new hiring. Despite these headwinds, wages have outpaced inflation on a year-over-year basis for 27 consecutive months, marking a sustained positive trend for American workers.
-QUOTE OF THE WEEK-
“The future belongs to those who believe in the beauty of their dreams.”
— Eleanor Roosevelt
CONSUMER SENTIMENT
Consumer sentiment fell in August for the first time in four months, despite July retail sales rising 0.5% month-over-month, which signaled stable spending patterns. The decline appears to reflect growing concerns about inflation, ongoing uncertainty around Federal Reserve policy, and the potential pass-through of tariff-driven price pressures. Although fears of a severe recession have eased, most consumers still expect both inflation and unemployment to deteriorate in the months ahead.
THE WEEK AHEAD
Looking forward, markets are turning their attention to the Jackson Hole Symposium, which begins on Thursday, August 21. Federal Reserve Chair Jerome Powell’s Friday address will be closely watched for signals on the timing and pace of potential policy easing. Meanwhile, the U.S. housing market remains subdued due to elevated interest rates. Upcoming data on housing starts and building permits (August 19), along with existing home sales (August 21), will provide further insight into conditions across the housing sector.
That’s it for this week’s update! If you’d like to delve into these topics further or have any other questions or needs as the week unfolds, don’t hesitate to reach out.
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