On Thursday, the headline August consumer price index (CPI) came in hotter than expected. CPI advanced to 2.9%, the largest increase since January, after climbing 2.7% in July. Consumer prices increased by the most in seven months in August amid higher costs for housing and food. Applications for US unemployment benefits jumped last week to the highest level in almost four years, indicating employers are firing more workers. Initial claims rose by 27,000 to 263,000 in the week ended Sept. 6, the highest since October 2021. The surge in first time applications for jobless benefits last week drove the unemployment rate to 4.3 percent in August 2025.
Recent evidence of cooling in the labor market, coupled with the CPI report has further raised the odds of interest rate cut by the Fed at their Sep 17 meeting. The market still expects the Federal Reserve to trim rates by 25 basis points next week, though there are increasing calls for a larger cut. For the week, the S&P 500 index added 1.6%, while the Dow gained 1.0%. The Nasdaq advanced 2.0%.
Future Wealth’s View
Our report on August 3rd, 2025 was titled “Expect Interest Rate Cut in September”. The link to the article is here – https://futurewealthllc.com/
Since that report, weakening economic data has continued to trickle in every week and we are now at a point where it is clear to everyone that tariffs have taken their toll on the US economy and there may be more to come. Here are the facts – Payrolls growth continues to slow. The unemployment rate continues to rise. Inflation is driving prices higher. Disposable income is declining and discretionary spending is decreasing.
But when the market talks, it behooves us to listen. The recent resilience in equity markets, rotation into cyclical and rate sensitive segments, and the emerging narrative of stabilizing labor markets and recovering activity from interest rate cuts are all driving the markets higher.
But markets aren’t infallible. With the 10 largest stocks in the S&P 500 now making up 42% of its overall market cap, many investors are concentrated in these names whether they intend to be or not. This makes managing one’s risk concentration more important right now. While it may be satisfying to see one’s portfolio moving higher with the market, balancing risk becomes more important as the bull market continues.
What the doctor ordered for one’s health applies to portfolio risk management as well – stay active.