Late August is considered the “Dog Days of Summer” in the capital markets, but a lot still happened this past week, which saw a mixed bag of economic data releases, political, and economic developments providing a nuanced picture.  Some reports showed surprising resilience in key sectors, others pointed to persistent headwinds. As financial markets continue to navigate an environment of elevated interest rates and geopolitical uncertainty, these data points offer valuable insights for investors and policymakers alike.

Market Drivers:

• New orders for manufactured durable goods decreased by 2.8% in July, a less severe drop than the 4.0% decline forecast by economists.¹
• The second estimate of U.S. GDP for the second quarter of 2025 was revised upward to an annual rate of 3.3%, a notable improvement from the initial estimate of 3.0%.²
• Pending home sales, a forward-looking indicator of the housing market, showed a modest increase of 0.7% on a year-over-year basis in July.³
• The Personal Consumption Expenditures (PCE) price index, the Federal Reserve's preferred measure of inflation, showed a slight acceleration in July.⁴
• Stocks Roll Over from All-Time Highs
• NVDA Declines After Q2 Earnings
• Bonds Under Pressure as Rate Cut Narrative Fades
• Trump Fed Pressure Campaign Continues
• Trump Family Launches WLFI
• Investors should remain disciplined and focused on long-term goals, and ignore short-term volatility heading into the fall.

Key Economic Highlights

1. U.S. Durable Goods Orders for July 2025: New orders for manufactured durable goods decreased by 2.8% in July, a less severe drop than the 4.0% decline forecast by economists.¹ This headline figure was largely driven by a significant 9.7% drop in the transportation sector, particularly volatile aircraft orders. Excluding transportation, a key measure of underlying business investment, orders surprisingly rose by 1.1%, significantly beating expectations.¹ This suggests that despite the headline volatility, core business investment remains on solid footing, a positive sign for the manufacturing sector.
2. U.S. Second Quarter GDP Estimate: The second estimate of U.S. GDP for the second quarter of 2025 was revised upward to an annual rate of 3.3%, a notable improvement from the initial estimate of 3.0%.² This rebound follows a 0.5% contraction in the first quarter. The revision was primarily fueled by a sharp decrease in imports and a stronger-than-expected increase in consumer spending. While this growth number is encouraging, it's worth noting that a significant portion of the growth was due to a technical swing in import data, rather than a broad-based acceleration in domestic demand.
3. U.S. July Pending Home Sales Year-Over-Year: Pending home sales, a forward-looking indicator of the housing market, showed a modest increase of 0.7% on a year-over-year basis in July.³ This came after an extremely sluggish June and offers a glimmer of hope for a market still contending with high mortgage rates and low inventory. However, sales declined month-over-month, underscoring the ongoing challenges and a market that continues to "grind through summer." Regionally, there were significant differences, with sales increasing in the Midwest and South but decreasing in the Northeast and West.
4. U.S. July Core and Headline PCE: The Personal Consumption Expenditures (PCE) price index, the Federal Reserve's preferred measure of inflation, showed a slight acceleration in July. Headline PCE increased by 2.6% year-over-year, while the more closely watched core PCE (excluding food and energy) rose to 2.9% from 2.8% in June.⁴ This indicates that despite some signs of a slowing economy, inflationary pressures remain somewhat elevated and sticky, a factor the Fed will closely monitor as it considers future monetary policy.

Market & Political Commentary

Stocks Roll Over from All-Time Highs: After reaching new record highs last week, the U.S. stock market pulled back, led by the technology sector. This retreat was not unexpected, as markets often consolidate or correct after significant rallies, especially when valuations are extended. The S&P 500 and Nasdaq Composite both ended the week lower, with the decline largely seen as a healthy reset after a prolonged period of upward momentum.

NVDA Declines After Q2 Earnings: Technology giant NVIDIA saw its stock decline following its second-quarter earnings report, a key contributor to the broader market's retreat. Despite beating Wall Street's forecasts for revenue and profit, the company's guidance and a slight miss in its data center revenue growth raised concerns about the pace of the AI boom. For a stock that had soared on sky-high expectations, even a strong report was not enough to prevent a selloff, underscoring how sensitive the market is to any hint of a slowdown in the AI narrative.

Bonds Under Pressure as Rate Cut Narrative Fades: The bond market experienced significant pressure this week, with yields rising across the curve. The 10-year Treasury yield climbed to 4.27% from 4.23% at the end of last week.⁵ This increase was driven by a reassessment of the Federal Reserve's path, with the narrative shifting away from a high probability of a rate cut. The sticky inflation data from the July PCE report, along with the resilient economic indicators, has made investors question whether the Fed will feel compelled to ease monetary policy in the near term. Rising bond yields make fixed-income assets more attractive relative to stocks, which can act as a headwind for equity markets.

Trump Fed Pressure Campaign Continues:  Political uncertainty added another layer of complexity to the market. President Trump continued his public pressure campaign on the Federal Reserve, criticizing its monetary policy and, in a significant development, attempting to remove a member of the central bank's governing board. This unprecedented move has raised alarms among economists and legal experts, who see it as a direct threat to the Fed's long-standing independence. Markets are watching closely, as a less independent Fed could be seen as less capable of combating inflation, potentially leading to higher long-term borrowing costs.

Trump Family Launches WLFI:  On the cryptocurrency front, the Trump family's new digital token, World Liberty Financial (WLFI), began trading on public exchanges on Monday, September 1. The token's market debut brought a mix of high-profile trading and volatility. While the initial public trading has theoretically boosted the Trump family's wealth on paper, the token's value has already seen significant fluctuations. The venture has also drawn criticism from government ethics experts who point to a potential conflict of interest as the administration works to shape the regulatory landscape for digital assets.

Heading into Labor Day Weekend, the US Court of Appeals for the Federal Circuit upheld and earlier ruling by the Court of International Trade that President Trump illegally invoked an emergency law to impose tariffs on US trading partners, setting up a fight over the Trump tariff program imposed since April.⁶

Outlook

The economic data from the past week paints a picture of an economy that is simultaneously resilient and fragile. The upward revision to Q2 GDP is certainly a positive headline, but the underlying drivers—specifically the role of import fluctuations—warrant a cautious interpretation. Similarly, the strength in core durable goods orders is a good sign for business investment, even as the overall numbers appear weak due to transportation volatility.

The inflation data, particularly the rise in core PCE, presents a continued challenge. While inflation has cooled significantly from its peaks, the lingering pressure suggests that the Federal Reserve's job is not yet done. This sets the stage for a high-stakes Federal Open Market Committee (FOMC) meeting in September, where the central bank's decision on interest rates will be heavily influenced by these and upcoming data releases. The ongoing political pressure on the Fed only adds to the uncertainty surrounding its next move.

Looking ahead, the market will be closely watching the August jobs report and consumer sentiment data to gauge the health of the labor market and consumer. The interplay between a decelerating, but still-growing, economy and sticky inflation will likely be the dominant theme for the remainder of the year. Investors should remain disciplined and focused on long-term goals, as short-term volatility is likely to persist heading into the end of the fall.

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Footnotes

¹ U.S. Census Bureau, "Durable Goods Manufacturers' Shipments, Inventories, and Orders," released August 27, 2025.

² U.S. Bureau of Economic Analysis, "Gross Domestic Product, Second Quarter 2025 (Second Estimate)," released August 28, 2025.

³ National Association of Realtors, "Pending Home Sales Index," released August 29, 2025.

⁴ U.S. Bureau of Economic Analysis, "Personal Income and Outlays, July 2025," released September 1, 2025.

⁵ U.S. Department of the Treasury, "Daily Treasury Yield Curve Rates," Data for August 25 - September 2, 2025.

⁶ Trump’s Global Tariffs Found Illegal by US Appeals Court, Bloomberg News, Aug 29, 2025, https://www.bloomberg.com/news/articles/2025-08-29/trump-s-global-tariffs-found-illegal-by-us-appeals-court

Researched and compiled with the assistance of Gemini 2.5.

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