WEEKLY OUTLOOK
Published 8/24/25
Current as of 8/26/25
1. Index: The S&P 500 index (SPX) and Nasdaq 100 index (NDX) both closed mixed for the week, with SPX higher and NDX lower. The longer-term weekly uptrends are intact over rising weekly moving averages.
2. SPX and the Dow Jones Industrial Average (INDU) both made new record weekly closing highs last week.
3. The FOMC Outlook – This past Friday, Jerome Powell gave a somewhat dovish/accommodative stance to a potential a Fed rate cut in September. In his written remarks: “Shifting risk balance may warrant policy adjustment”. Powell was much more accommodative in his tone than I expected, after many months of being somewhat neutral. I do not expect for him to take this somewhat dovish tone on Friday and then not follow through with a rate cut in September. That said, there are no guarantees in this market. Rate cut odds are at 75% currently.
4. Rotation: Over the past 30-45 days we have seen sector rotation into prior laggards in home construction, small caps, regional banks and solar. These are sectors that tend to benefit from a reduction in interest rates. Recent AI leaders including Taiwan Semiconductor (TSM), Vertiv Holdings (VRT), and Vistra Corp. (VST) all closed below their 10-week moving average, which is a cautionary trend signal. These charts could turn up at any time, but the weekly close below the 10-week MA is a caution signal for now.
5. Inflation: The July Producer Price Index (PPI) reported 8/14/25 came in well above forecast and above the June 12-month data. 12-month core PPI was reported at 2.8% vs 2.5% in June. Headline PPI was reported at 3.3% vs 2.3% in June. The higher 12-month readings are notable. The Fed’s stated inflation target is 2.0% for 12-month Personal Consumption Expenditures (PCE), this is currently at 2.6%. The July PCE data will be reported on 8/29/25.
6. Seasonality – As noted here on 7/27/25, over the last 10 and 20 years, August-September has been a net negative period for SPY. Seasonality is never a guarantee, and not all stocks or sectors will follow the index, but this is something that I stay aware of at this time of year. After that, October-December is usually strong. Please see the data below. It should also be noted that August is historically weaker, especially in the second term of post-election years. Data below and full post here. With all of that being said, there are two key reminders:
– Seasonality is never a guarantee, each market is unique. Current charts are always the best guide.
– Not all stocks or sectors will follow the index.
7. Current expectations: We remain bullish for the rest of 2025, but seasonal weakness/volatility and/or wide sector rotations over the next 3-4 weeks is something that we are prepared for. As a result, the target cash allocation is 5-8% and I do not expect any major sector overweights for now. If I am wrong, it is easy enough to put excess cash to work.
8. Nvidia earnings – Nvidia (NVDA) reports earnings after the close on Wednesday. (NVDA) is the market leader for AI and will be a key driver for the sector and the tech sector. We remain bullish longer-term on AI.
BEST IDEAS
– Our top ranked S&P 500 sectors currently are technology, industrials, financials, materials and consumer discretionary. Energy has been improving.
– Top-ranked bullish industries include: Artificial Intelligence (AI) tech, semiconductors, aerospace and defense, global miners, bitcoin, home construction, and global banks and brokers. Rate cut trades (home construction, small caps and regional banks are attempting breakouts. AI dependent stocks are consolidating. Any of these near-term trends could rotate at any time.
KEY DATA POINTS TO WATCH THIS WEEK:
1. Nvidia earnings, Weds.
2. GDP and weekly jobless claims on Thursday.
3. Monthly PCE on Friday.
BIGGEST POTENTIAL RISKS TO U.S. MARKETS
- Any headlines that put a September Fed rate cut in doubt.
- If Nvidia were to issue cautious guidance or miss earnings this week.
- Any breakout in inflation.
- A series of slowing economic data and/or labor market weakness. This has not shown up fully in the data yet, but the recent monthly payrolls report was below forecast.
FEATURED IDEAS
Corning (GLW)
GLW is breaking out to new highs today after Apple (AAPL) announced it will invest $2.5B into GLW to make all of the cover glass for iPhone and Apple Watches.
GLW is trading over all rising moving averages in a confirmed long-term uptrend.
Nvidia (NVDA)
NVDA reports earnings after the close on Wednesday at it remains the #1 pure-play Artificial Intelligence (AI) stock, with over 80% market share for AI related GPUs.
NVDA is in a confirmed uptrend over all rising daily moving averages.
Earnings could lead to wide trading ranges.
Newmont Corp (NEM)
NEM is the largest market cap gold miner in the U.S market and it is the only gold miner in the S&P 500 index.
NEM is in a confirmed uptrend over rising moving averages, and it is testing 3 1/2-year highs.
Gold and gold miners are both bullish ideas going into potentially another round of Fed rate cuts.
RTX Corp. (RTX)
RTX Corp. is a favorite idea in one of our favorite sectors, aerospace and defense.
RTX is a key player in the Golden Dome Missile Defense System announced by the White House in May.
This stock is in a bullish uptrend over rising daily moving averages and it is just below a breakout to new record highs.
SPDR Homebuilders ETF (XHB)
XHB is a rate cut trade, and stands to benefit from a potential Fed cut. Lower rates, if we get a cut, should stimulate the housing market.
XHB is in a bullish intermediate term uptrend, over 3 daily moving averages, with two rising.
This ETF also has a recent 50/200-day MA cross, often referred to as a “Golden Cross” which is a bullish trend signal.
DISCLOUSRES: We have long stock positions in NVDA, NEM, RTX and XHB.