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The Latest Market Insights
August 2025
U.S. Equity
Global markets posted moderate gains in August alongside elevated volatility, driven by shifting central bank policies, trade developments, and evolving economic data.
U.S. equities advanced, with the S&P 500 up 2%. Small-cap stocks stood out as rate-sensitive segments attracted renewed flows, while large-cap technology and AI-names maintained strength.
Sector rotation favored Energy, Materials, and Financials, signaling broader market participation beyond concentrated mega-cap leadership. The Dow Jones reached fresh highs, and corporate earnings—especially in technology—continued to surpass expectations. Nine of eleven S&P sectors posted gains, led by Materials.
International Equity
International equities also delivered strong results, supported by a weaker U.S. dollar and improving growth trends in both Europe and Asia. Global bonds rose 1.5% on expectations of looser central bank policies. U.S. Treasuries rallied on Fed cut speculation, while eurozone yields edged higher and Japanese yields climbed modestly amid stronger inflation. In credit markets, high-yield bonds outperformed investment grade as investor risk appetite remained firm. Commodities diverged, with energy prices easing and gold extending its climb.
Key Drivers
Federal Reserve Policy: Markets are heavily focused on a potential September Fed rate cut, spurred by softer labor market data and subdued inflation. Though the yield curve remains inverted, it has begun shifting toward a more normal shape.
Trade & Politics: New tariffs and ongoing trade disputes influenced sentiment, while political actions aimed at regulators and the Fed added uncertainty. Markets, however, largely absorbed these risks with resilience.
Global Growth: Stronger GDP figures in Europe and stabilizing PMI data worldwide suggested early signs of recovery in global manufacturing.
Liquidity, Volatility & Market Dynamics
Volatility increased in August as shifting rate expectations and policy headlines drove sharp sector rotations. Liquidity in certain equity and bond markets thinned at times, amplifying price moves. While broader risk appetite remained intact, the current environment underscores the importance of maintaining active risk management and portfolio flexibility as dispersion across asset classes and regions widens.
Market leadership is broadening beyond mega-cap tech, but valuations in high-growth names remain stretched, heightening the risk of pullbacks. While the AI and tech expansion is a durable trend, much of it is increasingly reflected in prices. We expect continued volatility as investors adjust positioning around potential Fed decisions and trade developments.
Looking ahead, focus will shift toward Q4 earnings strength, global consumer demand through the holiday season, and forward policy signals stretching into early 2026. Credit conditions and liquidity trends will be critical to assessing the durability of growth.
In response, we are making deliberate portfolio adjustments:
- Broadening equity exposure by adding to small caps, cyclicals, and international markets benefitting from dollar weakness and stronger growth abroad.
- Reducing concentration risk in stretched mega-cap technology names, while maintaining selective exposure to high-quality businesses with durable earnings.
- Balancing credit allocations by leaning modestly into high yield where liquidity supports it, while preserving core investment-grade exposure as ballast.
We remain cautiously optimistic, favoring diversification, tactical adjustments, and strict risk management to harness opportunities while mitigating volatility in the months ahead.
Why Stay Informed?
Staying informed about the latest economic trends and market movements is essential for making informed investment decisions. At Croghan Colonial Bank, we provide you with the insights you need to navigate these changes and optimize your investment strategy.
Important Legal Disclosures
*Investment products and services may lose value, are not a deposit, are not guaranteed by any financial institution, and are not FDIC insured or insured by any government agency.