Monthly Market Report – August 2025

Although August was a low-volatility month, the first session saw significant declines in equities. Employment figures highlighted the true state of the U.S. labor market. July data came in below expectations, but what really concerned the market was the downward revision of the previous two months’ figures. The 147,000 jobs initially reported in June were adjusted down to 14,000, while May’s data were revised from 144,000 to 19,000 jobs. This implies a sharp slowdown in U.S. job creation, which led the S&P-500 to drop -1.60% on the data release day.

Another relevant highlight in August was Jackson Hole. The annual symposium of central bankers in the U.S. had as its clear protagonist Powell and his speech on monetary policy. The Fed Chair clearly stated that the most likely outcome is a first rate cut in September in the U.S. This acted as a bullish catalyst for equities and bonds.

European politics created a new source of uncertainty after the vote of confidence announced by the French Prime Minister. The goal is to validate the fiscal adjustment designed by the French government, still pending budget approval. The vote of confidence will take place on September 8, and the consequences of its outcome are highly uncertain, which translated into declines in European equities and a rise in EUR yield curves during the last week of August.

The last of the Magnificent 7 to report earnings was NVIDIA. The U.S. tech giant’s second-quarter figures once again set records in revenue and profits. However, while growth remains very strong (revenue +56%), the pace of expansion is slowing progressively. This led to declines in NVIDIA’s share price in the session following the results release.

The U.S. macro data still show no impact from tariffs. Inflation came in below expectations (unchanged at +2.7% vs. +2.8% expected), while Q2 GDP was revised upward to +3.3%.

With the exception of some European indices, equities closed August higher. The U.S. benchmarks stood out, reaching new all-time highs. The S&P-500 hit 6,500 points for the first time, posting a +2.03% monthly gain.

As a result, the performance gap favoring Europe seen throughout 2025 has been erased. The S&P-500 is up +9.84% YTD, while the Eurostoxx-50 is up +9.31%. It is worth noting that in March the European index had outperformed the U.S. by +15%.

The Magnificent 7 and AI-related technology were once again key. NVIDIA reached a market cap of USD 4.5 trillion, while the group accounts for more than one-third of the S&P-500’s YTD performance.

Fixed income showed a mixed performance in August. The U.S. yield curve shifted downward, while its European peers were penalized by political uncertainty in France.

The weak U.S. jobs report and Powell’s statements at Jackson Hole pushed the 10-year U.S. Treasury yield below 4.20%. All maturities ended August with lower yields than in the previous month. This has led to an almost fully priced-in rate cut by the Fed at the September meeting.

As for euro-denominated fixed income, the European curves saw yield increases at the long end, especially after the vote of confidence announcement in France. As of end-August, the market does not price in further rate moves by the ECB over the remaining four months of 2025.

Meanwhile, the EUR/USD exchange rate traded in a sideways range throughout the month, halting the downtrend seen in July. The pair fluctuated between 1.175 and 1.155 EUR/USD.

Informe Mensual de Mercados - Agosto 2025Descarga

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