By Tim Russell, President & Wealth Manager at Life Financial Group
Originally shared on the Life in the Markets podcast — 08/25/2025
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Market Recap
Last week was a rollercoaster for investors. If you only looked at Monday through Thursday, you would have thought it was a terrible week for stocks. The S&P 500, Dow Jones Industrial Average, and Nasdaq all traded lower each day.
But then came Friday. Federal Reserve Chairman Jerome Powell delivered a highly anticipated speech, and markets hung on every word. His comments sparked one of the biggest rallies of the year, leaving the week in positive territory despite the early slump.
- Small-cap stocks (Russell 2000): Up 3.6%
- S&P 500: Up just under 0.4%
- Nasdaq: Down 0.8%
This performance suggests an important shift: smaller and mid-sized companies are beginning to outperform mega-cap tech firms. That’s a healthy sign for the broader economy, showing that value and diversification are regaining traction.
Elsewhere, gold jumped 1.1%, oil rose 2.5%, and Bitcoin remained flat.
What Earnings Are Telling Us
Corporate earnings also revealed interesting consumer trends.
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Home Depot & Lowe’s: Both saw strong results. Rising costs are shifting consumer behavior, but these retailers are adapting well.
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Walmart: Revenues and profits were up. Surprisingly, one of its fastest-growing customer groups is households earning more than $100,000 a year.
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Target: Struggled with higher prices and consumer backlash, pushing many higher-income shoppers toward Walmart.
Looking ahead, major reports from companies like NVIDIA, CrowdStrike, Dell, and Snowflake will offer further insights—particularly into the tech sector and how it’s handling tariffs and global demand shifts.
The Fed’s Dual Mandate
To understand today’s challenge, it helps to review the Fed’s “dual mandate”:
- Maintain full employment – avoid large layoffs and keep jobs plentiful.
- Maintain price stability – keep inflation under control.
The Fed uses its most powerful tool, the federal funds rate, to balance these goals. Lowering rates stimulates borrowing and investment, supporting jobs. Raising rates cools demand and slows inflation.
The problem? Pulling one lever often tugs against the other. Lower rates risk higher inflation, while higher rates can slow hiring and increase unemployment.
The Fed Is in a Tough Spot
Here’s the dilemma:
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By many measures, the U.S. economy is strong. Stock markets are near all-time highs, consumer spending is resilient, and corporate earnings are solid.
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But unemployment has ticked up slightly, and that has the Fed worried. Powell’s speech at Jackson Hole signaled that the central bank now views rising joblessness as the greater risk compared to inflation.
That message encouraged markets, since it hints at potential rate cuts. But the timing is tricky. Inflationary pressures—especially from tariffs—may not be fully reflected in the data yet. Acting too quickly could reignite price increases, while acting too slowly could weaken the labor market further.
What This Means for Investors
The Fed is essentially trying to thread a needle: protect jobs without letting inflation surge. No one knows exactly how this balancing act will play out, but it will have significant implications for markets in the months ahead.
As investors, the key is to stay diversified, avoid chasing short-term market swings, and pay close attention to shifts between large-cap growth and small-to-mid-cap value stocks.
A Closing Thought
As we enter a busy fall season, let’s not forget a timeless principle: generosity. Proverbs 22:9 says, “Whoever has a bountiful eye will be blessed, for he shares his bread with the poor.”
While markets shift and policies change, generosity remains a steady witness of faith. As you plan your finances, consider how you can use your resources to bless others in need.
Stay Connected
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Disclaimer: The topics discussed here are for informational purposes only and do not constitute specific investment advice. Investing involves risks, including potential loss of principal. Past performance does not guarantee future results. Securities and advisory services offered through Geneos Wealth Management, member FINRA/SIPC.
