This Week

Last week was an interesting one: stocks jumped on the heels of an in-line CPI that all but cemented expectations for a September rate cut, only to have that narrative muddied a bit by a much hotter-than-expected PPI later in the week. Traders mostly brushed off the latter with SPX finishing just shy of record highs. This week, all eyes turn to Jackson Hole for more insight into how the Fed is interpreting the recent data, with Powell’s Friday speech the highlight. Before we get there, here are some of the stories from over the weekend:

• Central Bankers Flock to Jackson Hole at Pivotal Moment (Bloomberg)

  • A big week is coming up for the Federal Reserve and central bank enthusiasts. The Kansas City Fed’s annual Economic Policy Symposium kicks off Thursday evening in Jackson Hole, Wyoming. Chair Jerome Powell in remarks on Friday is expected to unveil the Fed’s new policy framework — the strategy it’ll use to achieve its inflation and employment goals. Powell may also drop some hints about the Fed’s thinking ahead of its September policy meeting. Officials have left interest rates on hold so far this year as they wait to see how the Trump administration’s tariffs impact the economy.

• 'The risk that's on our doorstep': July inflation data has economists on edge (Yahoo Finance)

  • Markets ended the week largely unfazed by a hotter wholesale inflation print and signs of firming consumer prices, but some economists warn the underlying story is more concerning than investors seem to believe. The Producer Price Index (PPI) for July surged to a three-year high, with services inflation playing a key role in the gains. A similar trend appeared in the latest Consumer Price Index (CPI) report earlier this week as firming prices in services like dental care and airline fares marked a surprise reversal from the prior softening that had been offsetting higher goods prices from tariffs. The fresh data now puts the Federal Reserve, which targets 2% inflation, in a precarious position as tensions between its dual mandate of price stability and maximum employment begin to surface. Massive downward revisions in July's jobs report last week fueled concerns that the labor market is softening too quickly, strengthening the case for rate cuts. But the hotter-than-anticipated inflation data could suggest the need for more restraint. As of Friday afternoon, markets continued to price in about an 85% probability that the central bank will cut rates in September

• Why Goldman Sachs says the 'Goldilocks' stock market may get hit (Yahoo Finance)

  • Investors' "Goldilocks" summer could be coming to an end. After months of ideal market conditions, Goldman Sachs (GS) warns that underlying risks could send stocks tumbling. The current backdrop of stable economic growth, moderate inflation, and a strong earnings season — fueled by Big Tech's AI spend and hopes for an interest rate cut — has created a summer of rally. But a key factor behind the markets' stability has been a "volatility reset," with investors accepting lower returns on riskier assets as the market avoids sharp price swings. Goldman noted that during "Goldilocks" regimes, low market and economic volatility typically lead to more stable returns. However, the bank warned that this calm could quickly turn into a storm if growth slows or the Fed tightens monetary policy.

    "There is latent risk of unwinds in the event of negative growth and rate shocks,” Goldman Sachs analyst Christian Mueller-Glissmann wrote in a new note. Despite the stability, Goldman's "equity asymmetry framework" — which combines market volatility data and broader economic indicators — suggests the chance of a major market rally is relatively low in the current climate, as large rallies typically occur during recoveries, when the market is bouncing back from a significant downturn. However, the risk of a "drawdown," or a sharp market decline, is now elevated, and this risk has only increased recently. According to Goldman, such drawdowns are often triggered by factors like high stock valuations and a weakening business cycle. As the S&P 500 (^GSPC) notches a string of record highs in 2025, there's little room for mistake in a market priced for perfection.

• Big Tech Is Eating Itself in Talent War (WSJ)

  • Big Tech’s insatiable thirst for AI talent is threatening to kill its golden goose. Tech companies are paying AI researchers billions of dollars and using unorthodox tactics to grab the brightest minds. Their moves might help them near-term in the battle for AI supremacy, but they could also stifle a Silicon Valley innovation engine they badly need.

• Americans Pull Back From an Epic Credit-Card Binge (WSJ)

  • Americans are starting to pull back from a pandemic-era credit-card binge. After a surge in credit-card spending that pushed Americans’ card balances above $1 trillion, growth is now moderating. Credit-card spending has been growing more slowly than debit-card spending since late last year, the first such stretch in nearly four years, according to the latest spending data from Visa and Mastercard.

• Some good inflation news: Car insurance is falling back in line (Yahoo Finance)

  • Economists are busy hunting for signs of tariff-induced price hikes in the monthly inflation data. They may be overlooking some good news, which is that a surge in the cost of car insurance is finally abating. The cost of owning a car has soared during the last few years, with drivers absorbing hits from all angles. The average cost of a new car is now $49,000, and Trump’s tariffs will likely push that well above $50,000. As new cars get costlier, so do used cars. Fancy new technology and other factors, meanwhile, have raised the cost of parts, repairs, and maintenance. But the biggest jump has been in the cost of insurance, up 60% during the last five years, to an average monthly premium of about $213. A bill that was once an afterthought now totals nearly $3,000 per year, and a lot more for some vehicles and drivers. Relief is on the horizon. In April 2024, the annual rate of car insurance inflation peaked at 23%. It’s now at a much tamer 5.3%, and the lower annual price hikes are likely to stick.

• AI boom seen driving next decade of emerging markets performance (Bloomberg)

  • Emerging-market (EM) funds are pivoting to capture the artificial intelligence (AI) craze, with some investors predicting that booming technology spending will drive returns for years to come. Encouraged by the success of Chinese AI developer DeepSeek and Asia’s powerhouse semiconductor firms, asset managers like AllSpring Global Investments and GIB Asset Management are concentrating more of their portfolio in AI stocks. That’s been a winning trade, with AI companies being the six biggest contributors to the rally in Bloomberg’s EM stocks index this year. “This trend could last for the next 10 to 20 years,” said Alison Shimada, head of total emerging markets equity at AllSpring, which oversees US$611 billion. “The impact on local populations within EM will be transformational.”

• Samsung taking market share from Apple in U.S. as foldable phones gain momentum (CNBC)

  • In 2014, Apple and Samsung were duking it out to rule the U.S. smartphone market. Samsung was selling devices with large screens, and iPhone fans were demanding a response. It took Apple some time, but the company finally released the iPhone 6, breaking with previous iterations and giving consumers a large-screen option. The iPhone won. But more than a decade later, recent smartphone sales and shipment figures signal that the Apple-Samsung fight has returned. And once again, it’s all about the screen. In the second quarter, shipments from Samsung surged in the U.S., with its market share rising from 23% to 31% from the prior period, according to data from Canalys. Apple’s market share during the quarter declined to 49% from 56%. Apple remains on top of the U.S. smartphone market, taking the majority of new smartphone sales in the U.S. It’s often in second place around the world, but the recent slips points to turbulence for Apple for the first time in well over a decade.

Last week was a monthly expiration, and as highlighted in this space, that can have a dampening effect on moves, especially in situations where volatility had recently collapsed. One could argue that the whipsaw reaction to both the CPI and PPI would have been more volatile in a non expiration week. With expiration now passed, and Jackson Hole at the end of this week, we could see a trend throughout the week of increasing implied vols, as well as the potential for wider market swings. Despite that factor, options often have a difficulty distinguishing the recent past from the near future, so expected moves heading into this week are quite low. Keep an eye on these expected moves holding steady or even increasing as the week progresses:

This Week’s Expected Moves:

• SPX/SPY: 1.2% (6370-6530)

  • QQQ: 1.5%

  • IWM: 2.2%

  • TLT: 1.3%

  • USO: 3.8%

IWM options are pricing in a slightly smaller move this week compared to the past two, even though small caps have been the most volatile lately and options have mostly nailed that pricing. What’s notable now is the narrowing gap between IWM and QQQ volatility, which could signal the beginnings of a shift toward higher market correlation after weeks of divergence. If that plays out, we may be heading into a stretch where SPX and QQQ make more decisive moves, rather than the recent pattern of index quietness masking sector and single-stock swings that mostly offset each other.

Speaking of potential macro market moves, this week’s economic calendar is obviously headlined by Powell’s Jackson Hole speech at 10am Friday, but before that we get FOMC minutes and some other interesting housing, manufacturing data and more:

Economic Calendar (consensus): 

• Tuesday

  • 8:30am - Housing Starts (1.3m)

  • 2pm - Fed Bowman Speech

• Wednesday

  • 11am - Fed Waller speech

  • 2pm - FOMC Minutes

  • 3pm - Fed Bostic speech

  • Jackson Hole Symposium

• Thursday

  • Jackson Hole Symposium

  • 8:30am - Initial Jobless Claims

  • 8:30 - Philly Manufacturing

  • 9:45am - S&P Global PMI

  • 10am - Existing Home Sales

• Friday

  • Jackson Hole Symposium

  • 10am - Fed Chair Powell Speech

This week’s earnings reports are highlighted by a slew of big box retailer reports which could give us a pivotal update on the state of the consumer. In addition to that we also hear from Palo Alto, Zoom and others.

Earnings (with expected moves):

• Monday 

  • After-hours: PANW 7.4%

• Tuesday

  • Pre-market: HD 3.5%

  • After-hours: TOL 4.5%

• Wednesday

  • Pre-market: BIDU 5.5%, TGT 8%, TJX 4%, EL 10%, ADI 5%

• Thursday

  • Pre-market: WMT 4%

  • After-hours: ZM 7%, WDAY 7.5%, ROST 5.5%, INTU 5.5%

We’ve got a great lineup this week. Kicking things off tomorrow morning, Gene Munster. Check out the preview here:

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