Market Drivers:

• U.S. Equity Rally Falters: The S&P 500 and Nasdaq Composite both hit new record highs, extending the strong summer rally driven by a mix of positive economic signals and rate cut optimism, but fell from all time highs this week.
• Mixed Economic Data: Mixed reports on consumer spending and inflation influenced market sentiment, but overall, they supported the view that the Federal Reserve may have room to consider easing monetary policy.
• Early in the week, equities faltered, led by a reversal in big tech, with Nvidia down 3.5% on Tuesday.
• Focus on Jackson Hole: This week, the market's attention is on the Federal Reserve's annual symposium, where Chair Jerome Powell's speech is expected to signal a rate cut in September.
• Government Investment in Intel: The U.S. government is considering a significant equity stake in Intel, marking a new phase of industrial policy aimed at bolstering domestic semiconductor production.^{1, 5}

Executive Summary

Even in the Dog Days of Summer, the past week saw a continuation of the positive momentum in U.S. equity markets, with major indices hitting new highs, before retreating this week. The S&P 500 and Nasdaq Composite both reached record closes, driven by a combination of favorable economic data and growing optimism about the potential for future interest rate cuts. Economic reports provided a mixed, but generally encouraging, picture, with a slowdown in consumer spending and mixed inflation signals influencing market sentiment. Looking ahead, all eyes are on the Federal Reserve's annual Jackson Hole symposium, where insights into the central bank's long-term policy direction are expected.

Key Market Performance

Major U.S. stock indices closed last week higher, continuing a strong summer rally. The S&P 500 rose 1.1% to reach its first record high since late July. The tech-heavy Nasdaq Composite saw an even larger gain, jumping 1.4% and hitting its third record close in four days. The Dow also climbed 1.1%, closing in on its first new high since December 2024².

However, the stock market rolled over this week, with the Nasdaq down about 3%, and the S&P500 falling by about 1.5¹.

Consumer Data has been mixed. While consumer confidence data disappointed, a drop in retail sales boosted optimism that the Federal Reserve would have room to consider a rate cut.

Jackson Hole Symposium: A Critical Juncture

The investment world's attention is now firmly fixed on Jackson Hole, Wyoming, as the Federal Reserve's annual Economic Symposium convenes this week (August 21-23). This gathering of central bankers, policymakers, and academics is widely considered one of the most influential events in global finance. This year's theme, "Labor Markets in Transition: Demographics, Productivity, and Macroeconomic Policy," sets the stage for critical discussions about the long-term structural changes affecting the economy.

Federal Reserve Chair Jerome Powell's keynote address is the most anticipated event of the symposium. Given the recent ambiguous economic data—with some inflation metrics still elevated and a softening labor market, Powell's remarks will be scrutinized for any clues regarding the Fed's future path on interest rates.  Heading into the Powells speech on Friday, the market is anticipating a rate cut signal, and the CME Fedwatch Tool is showing a 71% probability of a rate cut at in September 25 basis point rate cut in September⁴.

U.S. Government and Intel: A New Era of Industrial Policy

In a highly unusual move, the U.S. government is in discussions to acquire a 10% stake in Intel (INTC), a deal that would make the government the company's largest single shareholder⁴. This development follows an announcement that Japanese tech conglomerate SoftBank Group will invest $2 billion in the semiconductor giant. The potential government investment would be facilitated by converting a portion of the grants previously pledged to Intel under the CHIPS and Science Act into equity.

This move marks a significant shift from traditional subsidies to a more direct form of industrial policy. President Trump has criticized past administrations for intervening in free markets, which shows the temptation for government to put its finger on the scale. The government’s stated aim is to ensure domestic semiconductor production, a matter of national security given the chips' critical role in everything from consumer electronics to military systems.

For investors, the implications are multifaceted:

• Risk Mitigation: The government's backing provides a degree of security for Intel as it undertakes its ambitious and costly expansion plans. The federal support helps to mitigate the financial risks associated with scaling up production and building new foundries⁵.
• Government Oversight: This type of investment could lead to greater government influence and oversight in corporate decisions, particularly those related to manufacturing, supply chains, and technology development.
• Long-Term Strategy: The move signals a long-term commitment by the U.S. to revitalize its semiconductor industry and reduce reliance on foreign manufacturing, a trend that could benefit the entire domestic chip ecosystem.

Footnotes

1. YCharts, Bloomberg News, Nvidia-Led Tech Slide Cracks Summer Calm in Stocks: Markets Wrap, 8/19/25, https://www.bloomberg.com/news/articles/2025-08-18/stock-market-today-dow-s-p-live-updates
2. Investopedia, “Markets News, Aug. 13, 2025: S&P 500, Nasdaq Hit New Highs as Stock Market Rally Continues; Dow Nears First Record Since December," August 13, 2025.
3. Investopedia, “Markets News, Aug. 12, 2025: S&P 500, Nasdaq Close at Record Highs as Stocks Surge After CPI Report Boosts Rate-Cut Hopes," August 12, 2025.
4. BMO Economics, “A weekly perspective on the U.S. economy BMO August 15, 2025.” https://economics.bmo.com/en/publications/detail/61b156b5-1bf5-40db-b45b-2bd12931e436/; CME Fedwatch Tool, https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html
5. Bloomberg News, as cited in The Associated Press, "Trump administration vying to own a big stake in Intel after SoftBank's $2 billion bet on company," August 18, 2025. https://apnews.com/article/intel-softbank-trump-chips-d852cc20b144ca7222edabf1c7cba157

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