J. Powell Announces A Fed Pivot...
- Marc Bentin
- Aug 25, 2025
- 7 min read
Updated: Aug 27, 2025
BentinPartner Weekly
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Marc Bentin,
Bentinpartner GmbH
The summer lull cracked last week with US stocks dragged lower for most of the week by momentum breaking down for the MAG7 and the AI trade in general, one week after various inflation reports showed tariffs starting to filter into inflation readings and inflation prospects.
On Friday however, US stocks stormed higher, taking out the losses for the week, after J. Powell’s very nuanced speech hit the tape (and even a bit before) where the Fed Chair vowed to remain alert on inflation accelerating , at the same time signaling that the balance of risks had shifted and “may warrant adjusting our policy stance”, opening the door for and actually pricing with a 90% probability, a coming 25bps interest rate cut for the September FOMC meeting (and an 50%+ probability for another cut in October).
While stocks rallied by 1.5%, with similar gains for precious gold and silver, the dollar gapped down in a mirror-like fashion by 0.9%, short-circuiting recent efforts to recover, and likely opening the door for new lows for the cycle. As we said last week, in a view that seemed supported by a BCA report over the week end, we would rather buy CNY or other EM currencies to express a bearish view on the dollar, rather piling on more EUR or even CHF.
Friday’s recovery aside, tech stocks and MAG7 in particular still nursed losses for the week following two particularly weak session on Wednesday and Thursday when some AI names including PLTR and NVDA were inflicted some precipitous declines.
While historically, US indices generally posted further gains in the three months following a Fed pivot, even occurring with stocks at an all-time high, 55% of Nasdaq shares, as per last Friday, were still trading below their 50dMa medium term average, warranting that investors are turning more cautious on them.
10Y US Treasury yield closed 6bps lower on the week , as did European yields, with only Japanese 10Y yields closing 1 bp higher.
French President Macron seemed to fall in a credibility tailspin last week. After being confined to a stiff silence during his visit to Washington where President Trump laid out his plans for peace in Ukraine, E. Macron faced a strong rebuttal from Italy to his proposals to send boots on the ground in Ukraine as part of security guarantees, assuming a still very hypothetical (interview from S. Lavrov in French) accord could be reached. He also faced fresh accusations of not doing enough to fight antisemitism in France from the US ambassador in Paris to which E. Macron responded by summoning C. Kushner today at the French Ministry for Europe and Foreign Affairs, arguing his allegations “are unacceptable.” He also summoned the Italian Ambassador in Paris after M. Salvini suggested E. Macron to take his helmet and gun and go fight himself for Ukraine… This followed a week-long effort to sabotage deal/peacemaking efforts of D. Trump which both E. Macron and German Chancellor Mertz are obviously not in a hurry to see succeed, contending that Russia’s position (involving land concession and neutrality from Ukraine) continues to make reaching a peace deal difficult. On Aug. 19, Merz said that Zelensky and Putin could meet within the next two weeks but since then Russia has made clear no such meeting was on the agenda.
That said, the gains of the SP500 (which recouped an all-time high on Friday) and those of the equally weighed S&P(RSP), suggested that investors remain keen to stay in the market, albeit perhaps in a less concentrated fashion.
For what it is worth, we sold PLTR (and other large cap AI names), the top performing stock of the year last week following a first 9% downdraft (and before a second down draft) but could not resolve ourselves to jump back in on Friday, preferring to reload on safer and more reasonably priced names. We remain of the view that AI is now in a bubble of epic proportion (a view partially shared by S. Altman himself) …with an unfavorable risk/reward. That said, we still hope to be wrong…and remain committed more to the price action than our own gut feelings…because the path of resistance still seems to up rather than down.
Elsewhere, Chinese stocks staged a strong rally last week, going up for 5 days in a row even as US (and EU) stocks sputtered, as Chinese investors seemed keen to switch bonds for stocks and with investors keen to buy Chinese chip makers (Cambricon shares jumped 20%) after China moved to restrict purchases of “degraded” Nvidia H20 chips and after AI start up Deepseek said it was issuing a new AI model compatible with Chinese chips.
During the Jackson Hole Symposium, ECB President C. Lagarde insisted that Central Bank independence remains critically important, just as the US administration built up pressure on the Federal Reserve to expedite MAGA friendly nominations (and try to force firing without due process). She probably meant, some sort of independence would also be welcome at national economic statistical agencies after D. Trump summarily fired the Head of the BLS (Bureau of Labor Statistics) after the agency published a weaker than expected July US Non-Farm Payrolls report and replaced her with someone with little other accreditation than being a MAGA supporter who called his predecessor “incompetent”.
This week, the market will be awaiting Nvidia results on Wednesday (after the market close; EPS expected at $1-$1.01; revenue expected at $45.5-$46bn) for a reason to continue to rally with the Fed preferred inflation reading (core CPE) to be released on Friday with expectations at 2.9% yoy (from 2.8% last month).
Over the past week, the S&P500 gained 0,3% (10,1% YTD) while the Nasdaq100 dropped -0,9% (11,9% YTD). The US small cap index rallied 3,4% (6,3% YTD, Z-score 2,4). AAPL dropped -1,7% (-9,0%).
The Equally Weighed SP500 gained 2,0% (8,1% YTD, Z-score 2,2), outperforming the S&P500 by 1,7%. The median SP500 YTD return closed the week at 7,2%.
Cboe Volatility Index dropped -5,8% (-18,0% YTD) to 14,22.
The Eurostoxx50 gained 0,6% (14,6%), outperforming the S&P500 by 0,3%.
Diversified EM equities (VWO) gained 1,6% (18,5%), outperforming the S&P500 by 1,3%.
The Dollar DXY Index (UUP) measuring the USD performance vs. other G7 currencies dropped 0,0% (-7,1%) while the MSCI EM currency index (measuring the performance of EM currencies vs. the USD) dropped -0,4% (6,1%).
10Y US Treasuries rallied -6bps (-32bps) to 4,25%. 10Y Bunds dropped -7bps (36bps) to 2,72%. 10Y Italian BTPs rallied -6bps (0bps) to 3,53%, underperforming Bunds by 1bps.
US High Yield (HY) Average Spread over Treasuries climbed 0bps (-8bps) to 2,79%. US Investment Grade Average OAS climbed 2bps (-6bps) to 0,81%.
In European credit markets, EUR 5Y Senior Financial Spread climbed 0bps (-10bps) to 0,54%.
Gold gained 1,1% (28,5%) while Silver rallied 2,3% (34,6%). Major Gold Mines (GDX) rallied 3,3% (77,5%).
Goldman Sachs Commodity Index gained 1,4% (3,3%). WTI Crude gained 1,4% (-11,2%).
Overnight in Asia…
Ø S&P future -5 points; Hong Kong +0.0%; Nikkei+0.5%; China +0.0%
Ø Asia rallied overnight on the heels of the strong US close last Friday with US futures now mostly stable.
Ø Ukraine struck Russia's Baltic port of Ust-Luga with long-range drones overnight, targeting the Novatek PJSC gas processing complex. Ukraine intensified attacks on Russia’s energy sector recently as Donald Trump moved closer to Vladimir Putin’s position than that of his European allies following the Alaskan summit between the US and Russian presidents on Aug 15, Bloomberg reported.
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