Rise Advisors Market Update August 2025
Rise Advisors Market Update
August 28, 2025
Transcript Below
Hi everybody, this is Zach Harrington from Rise Advisors, and I'd like to thank you for taking the time to watch our August market update. And as we sit here in late August, it's very similar to where we sat in July with a couple of key caveats.
Today we're going to talk about a couple of things. We're going to pan out and we're going to look at the kind of macro level of things. There was some really important CPI data as well as PPI data that came out within the last week or so that I think is important for us to touch on. We're going to continue to beat the dead horse of Jobs data in the state of the overall labor market and we're going to look at earnings expectations, which have continued to be really rock solid. We'll talk equity markets and some of the things driving the stock portion of your portfolio. And then we'll end with a bond market outlook and some kind of hot takes when it comes to where we see rates going, at least on the short end of the curve over the next year or so.
So, talking about the macro level, we have what's called CPI or the consumer price index, which is kind of the Fed's preferred measure of inflation. And when you hear inflation was hot or cold, this is predominantly what you're hearing about is CPI. There's then what's called PPI, which is the producer price index, which can tend to be a canary in the coal mine of where CPI is headed. It measures what was the inflation markers tied to, what producers or businesses are taking on or dealing with.
So, CPI in July that was released last week came in kind of below expectations 2.7%, very much in alignment with expectations and was a good overall beat. But the market got a little bit spooked because the day later PPI came out and wholesale prices rose 0.9% larger than expected and a lot of consumers tend to be a little bit worried, or excuse me, investors tend to be a little bit worried that that could be an indicator that CPI might heat back up and the Fed may keep rates higher for longer. I think my personal opinion is that I think there's some lead time here for PPI to remain elevated without actually seeing CPI increase. I think with the One Big Beautiful Bill Act that was passed in July and the permanent enactment of corporate tax rates where they sit today, I think a lot of CFOs and willingness to remain in the good graces of the administration are going to eat some of those costs for a while and we will have to pay attention to see if these are permanent cost increases that are being passed on to consumer, or if these are just temporary shocks based on the tariff costs, that'll be important to see.
I'm going to beat the dead horse, it feels like every single time I do one of these videos we talk about the labor market and there was a lot of news since I last recorded one of these around the labor markets in general. The US in July added just 73,000 jobs way below expectations, but most importantly, the June data was revised significantly lower than where it was. That led to some changes in some of the leadership at the Bureau for Labor Statistics, but Jeremy Siegel, one of the leading economists on earth came out and said like, Hey, if I think the Fed saw the June data of what it actually was, they probably would've cut rates in July. The labor market is continuing to weaken. We don't necessarily need this job data to be accurate or not. Just talk to people in your life, people who are meeting with recruiters, people who are looking for jobs, people who have lost their jobs, it's ramping up and it's one of those things that the Fed may be too slow to act here, and I think it's really important that we keep in mind labor market remains weak.
With that being said though, Q2 earnings that have been reported basically throughout the months of July and August have been really good. This chart here you're looking at basically shows what were the pre-season estimates, so going into earnings season, what did people expect earnings to come in at versus where they actually were. And what you're seeing is one of the biggest year over year earnings growths and outperformance of expectations on the S&P in quite some time. So you're looking at right now, this is as of mid-August, the basically average earnings beat was by 7.7% above what the pre-season estimates were. So this means not only have analysts basically been proven wrong when it comes to their doom and gloom outlook for corporate America, but corporate America is remaining really resilient and that's why markets have been so good.
When we look at the equity market outlook, though, I think what's become clearly evident in equity markets is that the consumer doesn't really matter. If you look at any of the consumer data that's out there, so whether it's weakening job growth, whether it's auto loan delinquencies, credit card delinquencies, anything around the housing market, it's all really, really negative. But the market keeps remaining resilient. I think the market is efficient and what it's telling us is that the consumer doesn't matter right now. It has historically, and it may again in the future, but for right now, the number one thing the market cares about is the hyperscalers, these big tech companies that are doing this AI build out and infrastructure spend, going to remain spending. We still have to see Nvidia earnings, they may be out by the time this video comes out, but for the most part, when you look at the Metas of the world, the Apples of the world, the Alphabets of the world, so on and so forth, that CapEx spend is continuing. And with that CapEx spend means that a lot of these names are going to continue to perform well and equity markets will remain resilient even in the face of tariffs, even in the face of a weakening consumer. It's just the separation of haves and have-nots that we've talked about in these videos.
What's important to keep in mind though, is inevitably the shoe is going to drop, and what that means is, is the market's walking a tightrope right now and in the event that the market basically determines that the CapEx spend of these hyperscalers is not going to lead to real world implementation of AI at the corporate level, the bubble might burst here. So right now, AI is really fun at making funny pictures or videos or you know, editing emails or being a glorified search engine. But gradually here the expectation is that as people become more and more comfortable with it, it's going to lead to more adaptation to larger scale modeling in corporate America. Assuming that that runs in tandem with the CapEx spend, this could be a raging bull market for years to come, but we're walking a tightrope right now and it's really important that we pay attention to those two things: are the hyperscalers continuing to spend at the pace that they're spending and is there broad adaptation and acceptance of AI in corporate America? If that's the case, the market continues to rally from here.
Which leads me to a really important chart that I find fascinating. So this looks at what I call tech revolution 1.0. This looks at the S&P 500 and it basically says, what was the average revenue per employee in 1991 before the broad kind of adoption of internet and technology and IT infrastructure and all of these things. Versus what was the revenue per employee in 2025? What's astonishing is how much more corporate America has been able to do with less. This chart shows you kind of sector by sector, but let's look at the broad S&P 500. Average revenue per employee was around $406,000 per employee in the S&P 500 in 1991. What does that mean? For every one employee a company, had they had $406,000 of revenue attributable to that employee. That number today in 2025 sits at about $642,000 per employee. Technology has made companies that much more efficient.
Now, what does that have to do with AI? Well, if they can now have less employees but continue to grow revenue, do we continue to see this expansion of profitability, efficiency, and just overall corporate excellence here in the United States? I look at this one of two ways. I have a Draconian view, which is AI takes over revenue expands, we continue to have this section of haves and have nots, and inevitably we end up with a society where people no longer have jobs and we have a French revolution on our hands perhaps, that's my pessimistic view.
My optimistic view is that reproduction rates are historically low, people aren't having children, populations are declining, and this could help solve that problem. If corporate America can solve some of the population and staffing issues that are presenting itself over the secular term, this may help solve it and could be an overall tailwind for the market as a whole.
Onto the bond market side of things. In the months since we last met, Donald Trump has continued his, for lack of a better term, FU campaign on Jerome Powell and has continued to basically say that we need to find a new chair. I'm not going to fire him now, but I'm actively searching, and this has become one of the most public job searches probably in the world today. The top names that are being floated around are all very adamant that rates need to go lower and have kind of come out and campaigned for themselves, saying, if I am given the opportunity to be the Fed president, I will happily lower interest rates to a rate that seems agreeable with this administration.
With that being said, I think it's really important for us to look at what this next 12 months could look like. It's my opinion that we're going to see two rate cuts here in 2025, one in September, and one likely at year end as the Fed tries to kind of save face for what was a botched missed cut in July given the June jobs data. With that we're going to see the start of the year with a fed fund rate, kind of with a three-handle meaning in the 3% range, and the Fed is going to start to publish some information around perhaps that lowering rates further from where it sits now could be inflationary and work against what their mandate is. I expect that whoever the projected new fed chair is going to be is going to be adamant that these are one-time shocks to the system and it's going to create some volatility in the bond market. Are rates going lower? Are they remaining the same, and how does this impact the bond market as a whole?
I expect to have a dovish Fed chair come basically May of 2026. I expect additional rate cuts, and I think that we're going to be in a position where we're going to see a Fed fund rate in the high twos, low threes by end of 2026, which most people would put at neutral or even accommodative from a rate standpoint. This is going to flatten the short-term part of the yield curve, which is important for those of us who have money in savings accounts. Those rates are going to fall, and depending on how aggressive the rates cuts are, we may even see a flattening of the middle term of the yield curve, which would be really positive for things like mortgages and auto loans and other types of consumer lending products.
Overall, we still remain incredibly optimistic when it comes to capital markets as a whole, whether it's the bond market or whether it's the equity markets, but we are going to pay attention to a lot of the things we talked about in this video spending of hyperscalers who's elected its Fed chair, and is there broad adaptation of AI.
As always, we'll continue to do these videos on a regular basis to keep you informed of what we're thinking and what we're looking at. If you or anybody you know have any questions about the content that we've talked about here today, feel free to reach out. I'm always available and thank you so much for taking the time to watch our presentation on what is the August Market Update from Rise Advisors. Have a wonderful rest of your summer and I'll see you in September.
Sources:
https://www.cnbc.com/2025/08/12/cpi-inflation-report-july-2025.html
https://www.cnbc.com/2025/08/14/ppi-inflation-report-july-2025-.html
https://www.cnbc.com/2025/08/01/jobs-report-july-2025.html
https://chartkidmatt.com/p/never-underestimate-corporate-america
https://chartkidmatt.com/p/are-s-p-500-companies-really-doing-more-with-less
This presentation is for Informational purposes only.
All investment strategies including rebalancing and diversified asset allocation have risk. Past performance of our investment approach, component holdings and methods does not guarantee future results. Advisory services offered through Rise Advisors, LLC ("Rise") Registered Investment Advisor. While all data is believed to be from reliable sources, accuracy and completeness are not guaranteed.