Weekly Macro Report, August 10 2025
1. Economic Growth & Outlook
Economic momentum is strong, with the S&P 500 around 6,389 as of August 8. US GDP grew at a 3% annualized rate in Q2 2025. The Federal Reserve maintained its effective federal funds rate at 4.33% in August, indicating a cautious stance amidst robust growth, which may influence employment and inflation prospects.
2. Labor Market
The U.S. labor market slowed in July 2025, marked by a 73,000 increase in nonfarm payrolls and downward revisions. The unemployment rate rose to 4.2%, indicating a modest increase in joblessness. These indicators suggest a decelerating economy, which may prompt the Federal Reserve to consider rate adjustments.
3. Interest Rates
As of August 2025, the 30-year Treasury yield stood at 4.81%, while the 20-year yield was 4.83%. Corporate yields showed the AA-grade at 4.63%, indicating stable borrowing costs for top-rated businesses. These conditions suggest that high-grade bond investors can expect reasonable returns, while businesses face moderate borrowing costs.
4. Yield Spreads
As of August 8, 2025, the US yield curve spread between 10-year and 2-year Treasuries stands at 0.51%, indicating expectations for moderate economic growth. The 10-year TIPS real yield is at 1.90%, reflecting solid inflation-adjusted return demands consistent with stable growth prospects. Credit spreads remain around historical averages, suggesting a neutral investor risk appetite without heightened concerns of credit stress.
5. Inflation Dynamics
As of July 2025, the U.S. headline CPI is forecasted at 2.8%, with core CPI at 3.0%, driven by shelter and services sectors. The Producer Price Index rose 2.6% year-over-year in June, often a precursor to CPI movements. Current data emphasize rent inflation's impact on CPI changes, with tariffs influencing goods prices. The 10-year breakeven rate's stability suggests well-anchored long-term inflation expectations.
6. Money Supply
The M2 money supply grew 4.5% year-over-year in June 2025, indicating a robust expansion. This growth outpaces available inflation metrics, suggesting inflationary liquidity conditions. The increase is driven by less restrictive monetary policies, as broad credit creation remains stable.
7. Consumer Sentiment
In July 2025, the University of Michigan Consumer Sentiment registered 61.7, up from 60.7 in June, while Consumer Expectations slipped slightly to 57.7 from 58.1. The spread between expectations and current sentiment remains negative but narrowed, signaling cautious optimism among households. Meanwhile, the US yield curve (10-year minus 2-year Treasury) was positive at 0.51 percentage points on August 8, reflecting modest confidence in economic growth ahead. This alignment suggests consumers and bond markets both perceive moderate prospects, balancing concerns about job security and inflation against growth expectations.
8. Housing Market
As of mid-2025, home prices have shown regional declines but remain elevated nationally, with a median price near $435,300 in June. Existing home sales fell 2.7% in June, while inventory surged over 25% year-over-year, now exceeding 1.1 million active listings—the highest since 2019. Mortgage rates recently dipped below 6.5% after hovering around 6.7%, sparking a refinance surge. These trends reflect an improving supply balance, yet affordability remains constrained by still-high prices and borrowing costs.
9. Stock Market Sectors
As of early August 2025, the market showcases sector disparities. Financials performed well over the past year, with a 26.1% gain, driven by strong banking results. In contrast, Health Care and Energy have lagged, with Health Care declining 4.7% over 12 months and Energy experiencing a 7.3% drop, impacted by sector-specific challenges and shifting investor preferences.
10. Stock Market Valuation
US equity valuations remain elevated as of August 2025, with the S&P 500 PE at approximately 29.26 and the Shiller PE at 38.2. These metrics indicate a premium to global markets, driven by strong US corporate earnings and investor optimism. The valuation gap is particularly pronounced compared to international peers, where other indices typically trade at lower multiples.
11. Stock Market Internals
As of August 7, 2025, the VIX closed at 16.57, down from 20.38 on August 1, marking an 18.6% decline over the week, reflecting easing short-term volatility expectations. Momentum and Growth factors have outperformed, while Value and High Dividend Yield lag, signaling sustained investor appetite for risk and growth exposure. This rotation indicates a market environment favoring higher beta and quality growth stocks amid moderating uncertainty.
12. Global Equity Performance
The US equity market led global gains in Q2 2025, with the S&P 500 surging 10.9% driven by tech giants like NVIDIA (+45.8%) and Meta (+28.2%), and growth stocks outperforming value. Meanwhile, the Eurozone, anchored by Germany, gained modestly as the ECB cut rates twice, supporting a 1.4% rise in European equities despite geopolitical tensions. In emerging Asia, India’s equities contributed strongly to the MSCI EM Index’s 12.2% gain, boosted by improving trade dynamics and risk appetite, signaling a notable rotation toward growth and international markets.
13. Commodities
Gold prices reached historic highs above $3,440 per ounce in August, driven by central bank gold purchases and institutional demand. Silver rose 39.66% year-over-year, fueled by strong investor sentiment and monetary policy uncertainty. These increases reflect continued interest in precious metals as a hedge against geopolitical instability and inflation.
14. Crypto Market
Bitcoin recently hovered around $118,838, while Ethereum surpassed $4,100. Ethereum's price has risen 54% in the last month, outpacing Bitcoin's growth. This trend is driven by speculation and Ethereum's role in stablecoin issuance, bolstered by regulatory developments like the GENIUS Act.
15. Currencies
The US Dollar held steady in early August amid tepid labor data and tariff concerns, maintaining near 0.86 EUR/USD. The Euro gained slightly on policy clarity in the UK, where the Pound recovered after a 25 bps rate cut to 4%, signaling limited near-term easing. The Japanese Yen softened against the dollar, pressured by diverging monetary expectations. Commodity-linked currencies, including the Canadian and Australian Dollars, showed mixed performance reflecting global trade uncertainties. Persistent inflation and fiscal challenges in the UK and US are likely to influence capital flows and monetary policy direction into Q3 2025.
16. Debt Levels
As of early 2025, U.S. federal debt reached 121% of GDP. This surpasses the Euro Area's 87% but is half of Japan's 235%. The primary risk is rising U.S. interest costs, projected to reach significant levels soon, necessitating fiscal adjustments and signaling heightened fiscal risk and market volatility for investors.
17. Economic Calendar
In the month ahead, key data releases include the September 4 Initial Jobless Claims and the September 17 Federal Reserve meeting. The August 29 or similar week's JOLTS Job Openings report will also be crucial. These indicators will shape expectations around the Fed's potential adjustments to the federal funds target rate based on labor market conditions and broader economic health.
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