By Rick Schwerd | August 15, 2025
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Markets Continue Hitting New Highs
July retail sales showed a 0.5 percent month-over-month gain, building on last month's strong 0.9 percent increase. Year-over-year retail sales growth now sits at a healthy 3.9 percent. Purchases of cars and auto parts were a strong driver in July. Healthy retail sales and the prospect of rate cuts provide a solid backdrop for equity markets. We now have a clearer picture of what tariffs will be on major trading partners, but the actual effects will take time to filter through the economy..
U.S. Treasury yields remain at the lower end of their recent ranges. The benchmark 10-Year U.S. Treasury bond is currently yielding 4.28 percent.
Mixed News on Inflation
Stocks rallied on Tuesday as the July headline Consumer Price Index (CPI) came in at 2.7 percent year over year, the same as the previous month. This was lower than expected as tariffs were expected to push prices meaningfully higher. Core CPI, which removes volatile food and energy prices, rose 0.2 percent year over year in July, coming in at 3.1 percent.
Interestingly, markets looked past Thursday’s Producer Price Index (PPI) data, as both headline and core readings came in much hotter than expected. The surge in PPI and more benign CPI data may be telling us the same story: companies are paying higher prices for inputs due to tariffs but, for now, are not passing those costs on to consumers.
Both readings show that inflation is continuing to run above the Federal Reserve’s 2 percent inflation target. However, given the disappointing jobs report earlier this month and recent market expectations, the Federal Reserve is expected to institute a 0.25 percent rate cut at its meeting next month with an additional cut later this year.
Retail Sales Remain Robust
July retail sales showed a 0.5 percent month-over-month gain, building on last month's strong 0.9 percent increase. Year-over-year retail sales growth now sits at a healthy 3.9 percent. Purchases of cars and auto parts were a strong driver in July. Healthy retail sales and the prospect of rate cuts provide a solid backdrop for equity markets. We now have a clearer picture of what tariffs will be on major trading partners, but the actual effects will take time to filter through the economy.
Looking Ahead
Next week, the Federal Reserve has their annual Jackson Hole Wyoming Symposium. While no policy changes will be made there, the commentary from the meeting is likely to foreshadow the Fed’s actions for the remainder of the year. We will also get several housing-related data points released next week. The housing market remains depressed as limited supply, high prices and elevated mortgage rates weigh on activity.
Although the second quarter’s earnings season is mostly rapped up, the largest company by market value, Nvidia, is set to report on August 27. A strong report could add more fuel to the recent run in tech stocks, while a disappointing one could cause some near-term volatility.
As always, if you have any questions or concerns regarding markets or your financial planning needs, please reach out to us at (518) 415-4401.
About the Author: With almost three decades of financial industry experience, Rick serves as a Senior Investment Officer at Arrow Bank, formerly named Glens Falls National Bank and Saratoga National Bank. He oversees individual and corporate retirement plans, personal trusts, investment management accounts, foundations and not-for-profit relationships.