Week of September 1, 2025

Key Points for the Week

• The S&P 500 ended August higher, its fourth consecutive monthly increase.
• Although it gained in the sometimes-troublesome month of August, be aware that historically September is the worst month of the year, increasing the odds for some volatility for the rest of the month.
• Markets are now expecting six interest rate cuts by the end of 2026.
• Rate cuts along with deficit-financed stimulus both tend to support stocks.

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Current Trends & News is a weekly financial recap curated by SPC Financial®'s team of wealth management and tax-integrated advisors. We monitor and explore the intricacies of the financial world and share insights into market developments.

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Economic Update

There is always a diversity of opinion about whether stocks are headed higher or lower. Last week, investors were feeling more bearish than bullish about where the stock market may be headed over the next six months. The American Association of Individual Investors (AAII) Sentiment Survey showed:

Investor outlook	Week ending August 27, 2025	Historic average
Bullish	34.6%	37.5%
Bearish	39.4%	31.0%
Neutral	26.0%	31.5%

While investors who participated in the survey were leaning toward pessimism, some economists and analysts had a sunnier view of what might be ahead. They were optimistic about:

Strong company performance. Profits for companies in the Standard & Poor's (S&P) 500 Index have been growing steadily. From April through June of this year, earnings grew by about 11.9 percent. It was the third consecutive quarter of double-digit earnings growth. In addition, analysts increased their estimates for earnings of S&P 500 companies over the July through September quarter, according to John Butters of FactSet.

Solid consumer spending. The primary driver of the United States economy is consumer spending. Last week, data showed consumer spending rising.

“Inflation ticked up slightly in July, but that didn't stop shoppers from opening their wallets. Consumer spending grew by 0.3 [percent] last month, the Bureau of Economic Analysis reported Friday, the strongest gain in four months. The increase, fueled by rising compensation, shows households are still willing to spend even as inflation remains elevated."

Nicole Goodkind, Barron's

In addition, some Americans may find their wallets are a little fatter next year when tax refunds are issued.

“The IRS announced that, as part of its phased implementation of the OBBBA [One Big Beautiful Bill Act], it would not be adjusting W2 or 1099 forms for the current calendar year...This seemingly innocuous statement confirms that we will see an even larger crop of personal income tax refunds early in 2026 than was anticipated when the OBBBA was passed. These higher income tax refunds should work much like a new round of stimulus checks, adding to consumer demand and inflation pressures early next year."

David Kelly, Economist

Lower borrowing rates. Many on Wall Street are optimistic the Federal Reserve will begin to lower the federal funds rate in September.

"Now major financial firms expect a 25-basis-point U.S. Federal Reserve rate cut in September following Chair Jerome Powell's shift in tone at Jackson Hole toward rising risks in the labor market."

Rashika Singh, Reuters

It is impossible to know how the stock market will perform over the short term. That's why it's important to hold different types of investments in various asset class. Holding a well-allocated and diversified portfolio helps investors manage risk while pursuing financial goals.

Last week, major U.S. stock indexes moved lower. U.S. Treasuries rallied as yields declined on all but the longest maturities of Treasuries.

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The Federal Reserve and Inflation

In his August 22 speech at the Jackson Hole Symposium, Fed Chair Jerome Powell opened the door to a September interest rate cut Powell argued that while risks to inflation are tilted to the upside, risks to the labor market are tilted to the downside. Since policy rates are already in restrictive territory, the balance of risks means a cut may be warranted.

We just received the latest (July) reading on the Personal Consumption Expenditures Price Index (PCE), which is the Fed's preferred inflation metric.

• Headline PCE rose 0.2% in July. It's running at a 2.6% annualized pace over the last three months and is up the same amount over the past year.
• Core PCE (ex-food and energy) rose 0.26% in July—equivalent to 3.3% annualized. It's running at a 3% annualized pace over the last three months and is up 2.9% over the past year (the fastest pace since April 2024).

In short, core inflation, which is what the Fed looks at, remains stubbornly high, and it looks to be moving in the wrong direction.

Now, a some of this is coming from the tariff-related impact on durable core goods like furnishings, appliances, and recreational goods. PCE for durable goods is now up 1.1% since last year and running at a 1.5% annualized pace over the last three months. These numbers don't look too “hot” but the counter-factual (in the absence of tariffs) is that core goods prices would be falling, exerting a downward force on inflation, rather than pushing it higher.

You can argue that tariffs impacts are a one-off effect. It may not show up all at once (especially since tariff policy hasn't settled to its final place yet), but any impact should pass sooner rather than later. In fact, Powell made this case in his Jackson Hole comments, and just this week, Fed governor Chris Waller (who is the current favorite to replace Powell as Chair next year) said he is “back on Team Transitory.” He thinks the recent upward move in inflation is temporary.

Core goods inflation, as much as it's coming from tariffs, is temporary, but the problem is that it's not the only driver of elevated inflation right now. Case in point: In July the PCE index for durable goods fell 0.1% and yet core PCE was up 0.26% (3.3% annualized). In other words, the inflation problem goes beyond goods. Services inflation is a problem, and that's a harder one to solve. Up until last year, you could say that lagged housing inflation numbers were pushing up core services, but shelter inflation has normalized now. It also makes up a smaller portion of PCE than it does in the Consumer Price Index (CPI). PCE for core services excluding housing has been showing quite a bit of heat recently, and as you can see in the chart below, it's running well above where it was pre-pandemic.

• Core services excluding housing inflation rose 0.39% in July (equivalent to 4.7% annualized)
• Last 3 months (annualized): 3.0%
• Last 12 months: 3.3%
• 2018-2019 (annualized): 2.2%

Note that core services ex housing makes up over 50% of the PCE inflation basket—so it matters.

Here's another way to look at it. We looked at 178 items that make up the core PCE basket and calculated the distribution of year-over-year inflation at four different times. You can see how inflation really broadened out in June 2022 relative to December 2019. Then it started narrowing again through to the end of last year, but things haven't progressed since then, and in fact, look to be going in the wrong direction.

• In December 2019, 24% of items had inflation rates above 3%.
• In June 2022 (when inflation peaked), 72% of items had inflation rates above 3%.
• In December 2024, 40% of items had inflation rates above 3%.
• In July 2025, 45% of items had inflation rates above 3%.

We are still a long way from where things were in 2019 and not moving in the right direction.

The big picture is that the Fed's got an inflation problem and it's coming from two sources.

• PCE for durable goods is up 1.1% year over year (as of July), which is higher than anything we saw from 1996–2020. In fact, the average inflation rate for durable goods was -1.9%, i.e. prices headed lower and lower for 25 years.
• PCE for services is running at 3.6% year over year and is stuck at that elevated level, especially relative to the average of 2.5% from 1996–2020. (It averaged 2.9% from 1996–2008 and 2.1% from 2009–2020.)

As noted above, the downside risks to employment may warrant an insurance cut in September, if not another one in December. Markets are pricing in a lot more cuts into 2026. The chart below plots expected short-term rates at the end of each year from 2025 to 2031 on three dates: end of last year (December 31, 2024), Liberation Day (April 2, 2025), and the current level.

Markets are currently pricing in a policy rate of under 3% by the end of 2026. Given the current policy rate of 4.4%, that implies six cuts (each worth 0.25%-points) over the next 16 months. That's a lot more than what was expected at the end of last year, when markets expected the policy rate to land close to 4% at the end of 2026, implying just 2 cuts over the two years (2025-2026). Granted, we've seen the economy weaken since then, and expectations have fallen a lot, but even on Liberation Day, when recession odds were higher than they are now, markets expected the policy rate at the end of 2026 to be 3.4%, about 1%-point below where it is now (equivalent to 4 cuts).

All this to say, markets are now expecting a slew of rate cuts ahead, especially in 2026, even as recession odds have fallen (relative to April) and inflation remains a problem (and not just because of tariffs). Now, part of this may be because the market is pricing in a Fed that goes along with President Trump's desire to lower interest rates—he wants to see them near 1% (implying a 3%-point cut from where the policy rate is now), which is extreme given the current environment, but even if you get half of that, it lands you at a policy rate of about 3%. And that's exactly what markets are pricing in now. The green line in the chart does show that markets expect the Fed to start tightening policy again from 2028 onwards, but that's well out in the future.

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What is the Second Biggest Sports League in the World?

The National Football League is #1, but who is #2? Here's a hint: it's not Major League Baseball, the National Basketball Association, or the English Premier League (soccer). With $19 billion in revenue, the answer is the National College Athletic Association (NCAA).

“Hidden behind the pageantry of marching bands, fight songs and century-old rivalries with names like 'the Backyard Brawl' lies what is, in effect, the second-biggest sports league in the world (after the NFL). In 2024 college sport generated twice as much revenue as the English Premier League. Nearly all that came from American football and men's basketball. For decades the system was lucrative because the labor was free."

The Economist

The economics of college sports is changing again this year.

Over the last few years, college athletes had the right to profit from their names, images and likenesses (NIL). For example, it's estimated that Texas Longhorns quarterback Arch Manning had NIL deals worth $6.8 million, while Livvy Dunne, a gymnast at Louisiana State University, had NIL earnings worth an estimated $4.1 million, according to Nate Cunningham of Sports Illustrated. (Until recently, college athletes gave up their NIL rights when they signed with a college sports team.)

This year, colleges and universities will begin paying their athletes directly. As of July 1, 2025, institutions of higher learning are allowed – but not required – to spend about $20.5 million on athletes, reported Dan Murphy of ESPN. That amount is expected to grow.

“This new era will force athletic-department heads to act more like portfolio managers, balancing returns across a basket of sports. Many have indicated that they will mirror the recent federal court settlement. It allotted three-quarters of retroactive compensation to former football players, 15% to men's basketball, 5 [percent] to women's basketball and 5 [percent] to the rest.”

The Economist

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Nvidia

NVIDIA (NVDA), the world's largest company, had a market cap of $4.4 trillion as of August 28th, 2025. That is roughly equivalent to 6 Walmart's (WMT), 38 Nike's (NKE), or 94 Ford's (F), and NVDA now has a bigger market cap than the entire equity markets of five of seven G7 countries. (Source: Bespoke)

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A Reminder About Scams

Scams usually start with a phone call, email, text, or another form of communication. The person typically claims to be from an agency or organization you know – or one that sounds like it might benefit you, such as the National Sweepstakes Bureau or a lottery.

The person may know your name and address. They may give you their official title or an identification number. No matter how official they seem, you can be confident it is a scam if the person contacting you:

• Indicates there is a problem with your benefits.
• Asks you to pay to receive a prize.
• Suggests that paying will increase the chance of winning.
• Requests financial information, such as a bank account or credit card number.
• Pressures you to act immediately.
• Tells you to pay using a specific method, such as a gift card or cryptocurrency.

If this happens, remember that the Social Security Administration, the Internal Revenue Service, Medicare, and your bank do not call, email, or text to ask for money or personal information. They do not demand that you pay immediately, and they do not accept payment by gift card, prepaid debit card, cryptocurrency, or another untraceable form of money transfer.

When you suspect a scam:

• Hang up or close the message. Do not respond in any way.
• Remain calm.
• Think back over the call. Write down any personal information you may have inadvertently shared.
• Report the scam. Contact the Federal Trade Commission at ReportFraud.ftc.gov. You may also want to report the incident to your state's attorney general or your local consumer protection agency.
• Share your knowledge. Talk with family, friends, and neighbors about your experience so they know what to look out for.

When you receive a digital message, no matter how official it seems, do not click on any links. Do not give or confirm any personal information, including your name, birth date, phone number, address, email address, place of birth, driver's license, passport, or Social Security numbers, bank or other account numbers, and PIN numbers.

Being skeptical can keep you safe. Remove yourself from the situation. Do not share information. If you feel anxious and need to confirm that it was a scam, contact the organization using a method provided on their official website.

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IRS Shifts to Electronic Payments

On March 25, 2025, President Trump signed Executive Order 14247 — Modernizing Payments to and From America's Bank Account. The order requires all payments made from or to the IRS to be conducted via electronic funds transfer (EFT).

The purpose of the Executive Order is to combat unnecessary costs, delays, risk of fraud, lost payments, theft and inefficiencies. For Fiscal year 2024 issuing paper checks was estimated to cost taxpayers more than $657 million.

The phaseout of paper check disbursements and receipts is scheduled for Sept. 30, 2025. Payments such as fees, fines, loans and taxes must be made electronically where permissible under existing law.

A few exceptions will remain at the discretion of the Treasury secretary:

1. Individuals without access to banking services or electronic payment systems;
2. Emergency payments where electronic disbursement would cause undue hardship;
3. National security- or law enforcement activities where non-EFT transactions are necessary or preferred;
4. Other circumstances as deemed necessary by the secretary.

Heads of federal agencies must submit implementation plans within 90 days of the order. Treasury Secretary Scott Bessent has 180 days to submit an implementation report detailing progress under the order.

Taxpayers should prepare for the shift to electronic payments ahead of the Oct. 15 filing deadline.

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Did you Know? This Week in History

September 1, 1985: Wreck of the Titanic Found

On September 1, 1985, seventy-three years after it sank to the North Atlantic ocean floor, a joint U.S.-French expedition located the wreck of the RMS Titanic. The sunken liner was about 400 miles east of Newfoundland in the North Atlantic, some 13,000 feet below the surface.

Efforts to locate and salvage the Titanic began almost immediately after it sank, but technical limitations, as well as the sheer vastness of the North Atlantic search area made it extremely difficult. American oceanographer and former Navy officer Robert D. Ballard, who was based out of the Woods Hole Oceanographic Institution in Massachusetts, led his first search expedition in 1977, which was unsuccessful.

In 1985, along with French oceanographer Jean-Louis Michel, Ballard again set out to locate the wreck, this time with an experimental, unmanned submersible called the Argo, developed by the U.S. Navy. The Argo traveled just above the ocean floor, sending photographs up to the research vessel Knorr. In the early morning of September 1, Argo was investigating debris on the ocean floor when it suddenly passed over one of the Titanic's massive boilers, lying at a depth of about 13,000 feet.

The next day, the body of the ship was discovered nearby. It had split in two, but many of its features and interiors were remarkably well-preserved. Hundreds of thousands of bits of debris were scattered in a 2-square-mile radius around the ship. The wreck was subsequently explored by manned and unmanned submersibles, which shed new light on the details of its 1912 sinking.

The Titanic is now routinely explored, and several thousand artifacts have been recovered. Ballard—who was celebrated as a hero after the discovery—has led several more high-profile search expeditions, including of the RMS Lusitania and the USS Yorktown.

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Weekly Focus

"Knowledge is knowing that a tomato is a fruit; wisdom is not putting it in a fruit salad.”

L,Miles Kington, Comedian

"Ideas are like rabbits. You get a couple and learn how to handle them, and pretty soon you have a dozen."

L,John Steinbeck, Writer

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