Last week was another example of a market that could move higher even while the headlines remained complicated. Strong technology earnings, relatively stable Treasury yields and periods of improving geopolitical sentiment helped support stocks.
The biggest boost came from artificial intelligence. Nvidia delivered strong results and, more importantly, an outlook that reinforced expectations for continued heavy investment in AI infrastructure. That helped technology shares rebound after some early-week concerns about the cost and profitability of the AI buildout.
At the same time, the economic data remained broadly supportive. Business investment was solid, layoffs remained low and the Federal Reserve’s preferred inflation measure came in as expected.
But the inflation problem has not disappeared. Price pressures remain above the Fed’s target, and Chair Warsh used his Jackson Hole speech to make clear that the Fed is still focused on restoring price stability.
That leaves investors with a familiar balancing act: growth remains healthy enough to support markets, but interest rates and inflation still have the potential to become meaningful headwinds.
For now, the broader market trend remains constructive. The next test will be whether this week’s employment and business-activity data can reinforce the case for steady growth without pushing longer-term interest rates materially higher.
🔑 Three Market Takeaways from Last Week
🤖 1. Artificial Intelligence Is Still a Major Market Driver
Technology began the week under pressure as investors questioned both the rising cost of advanced AI chips and whether the most expensive AI models will ultimately generate enough usage and profit to justify the enormous investment behind them.
Then Nvidia’s earnings changed the tone. The company delivered strong results and especially strong forward guidance, reigniting enthusiasm across technology and semiconductor shares.
That matters beyond one company. AI-related spending has become an important source of business investment and economic growth, so continued demand can support both corporate earnings and the broader economy.
There is an important caution, however. The market remains highly sensitive to the AI story, and leadership can still be narrow. On Thursday, technology drove the major indexes higher even as most other major sectors struggled.
For investors, the takeaway is not that AI optimism is misplaced. It is that a market increasingly dependent on one theme can become more volatile when expectations change.
🏦 2. A More Hawkish Fed Isn’t Automatically Bad News
Fed Chair Warsh’s Jackson Hole speech was somewhat more hawkish than investors expected. He emphasized that the labor market remains healthy while inflation is still too high, increasing expectations that the Fed could raise rates in September.
Normally, the prospect of higher short-term rates would be viewed as a straightforward negative for stocks. In the current environment, the picture is more nuanced.
One reason longer-term Treasury yields have been elevated is concern that the Fed may not be doing enough to contain inflation. If one or two rate increases help restore confidence that inflation will be brought under control, that credibility could eventually help stabilize—or even lower—longer-term yields.
The distinction is important. A limited response to persistent inflation could ultimately be constructive; the beginning of a prolonged rate-hiking cycle would be a much more significant challenge.
That is why we continue to watch the bond market so closely. The level and direction of longer-term yields may tell us more about the market outlook than any single Fed headline.
📊 3. The Economy Still Looks Resilient—But Inflation Is Sticky
Last week’s economic reports continued to show an economy that is holding up reasonably well. Durable-goods data pointed to solid business investment, while jobless claims remained historically low and showed little evidence of a meaningful increase in layoffs.
Inflation was less encouraging, but it also did not worsen. Core PCE—the inflation measure most closely watched by the Fed—matched expectations and remained unchanged from the prior month on a year-over-year basis.
In other words, inflation appears to have stopped accelerating, but it has not yet fallen enough to give the Fed an all-clear.
That combination is close to the environment investors would prefer: steady growth without a renewed inflation surge. The challenge is that the margin for error is smaller when Treasury yields are already elevated.
This week’s employment and business-activity reports will provide the next important test of whether that balance can continue.
🧭 Inside Advance & Protect
Each week we explore one principle behind our Advance & Protect philosophy—and how it helps us navigate today’s markets.
Why Confirmation Matters More Than Being Early
Markets constantly tempt investors to make decisions before the evidence is complete. A strong earnings report can make a theme feel unstoppable. One inflation report can make a Fed decision seem obvious. A geopolitical headline can make an immediate portfolio change feel necessary.
Sometimes those first impressions prove correct. Sometimes they reverse just as quickly.
Advance & Protect is built around a different idea: we would rather respond to confirmed changes in the market environment than try to predict every turning point in advance.
That does not mean waiting until every uncertainty disappears. Markets never offer that kind of clarity. Instead, our process uses objective indicators to evaluate whether the underlying trend has changed enough to justify increasing or reducing market exposure.
This distinction can be especially valuable during periods like the current one. Investors are balancing strong economic growth and AI optimism against sticky inflation, elevated interest rates and geopolitical risk. Any one of those stories can dominate the headlines for a day or a week without necessarily changing the broader trend.
A disciplined process helps separate a change in the narrative from a change in the evidence.
Advance & Protect Insight: Being early and being right are not the same thing. We believe waiting for objective confirmation can be more valuable than making major allocation decisions based on a forecast that may or may not unfold.
👀 What We’re Watching This Week
👷 The Labor Market
Friday’s employment report is the most important economic release of the week, but investors will receive several labor-market updates before then, including job openings, private payrolls and weekly jobless claims.
The best outcome for markets would likely be continued evidence of a healthy labor market without a surge in wage or hiring pressure that would intensify inflation concerns. A sharp slowdown could revive recession worries, while an unexpectedly strong report could push Treasury yields higher.
🏭 Manufacturing & Services
The ISM manufacturing and services reports will provide another broad look at economic activity. Investors will be watching both the growth readings and, just as importantly, the price components.
Steady activity combined with easing price pressures would reinforce the Goldilocks scenario that has helped support markets.
📈 Treasury Yields & the Fed
The 10-year Treasury yield finished last week back above 4.70%, leaving it near an important area for the market. Stability—or a gradual move lower—would reduce pressure on stocks. A move to new highs would make interest rates a more meaningful headwind.
We will also be watching how markets continue to interpret Chair Warsh’s Jackson Hole message and the possibility of a September rate increase.
🛢️ Oil & Geopolitics
The U.S. and Iran exchanged strikes over the weekend for the first time in several weeks, pushing oil prices higher as the new week began.
Markets are not currently treating that development as the start of a major escalation, but the Strait of Hormuz remains an important link between geopolitics, oil prices, inflation and interest rates. We will continue watching for either renewed ceasefire progress or signs that tensions are intensifying.
🧭 Final Thoughts
Last week offered a useful reminder that markets can remain constructive even when the economic backdrop is not perfect.
Technology earnings were strong. Business investment remained healthy. The labor market continued to show resilience. And inflation did not accelerate beyond expectations.
At the same time, there are still meaningful issues to monitor. Inflation remains above the Fed’s target, longer-term interest rates are elevated, and geopolitical developments can quickly affect oil prices and market sentiment.
That is why the coming week matters. The employment and ISM reports should give investors a clearer picture of whether the economy can continue growing at a healthy pace without reigniting inflation and pushing yields materially higher.
For now, the evidence remains broadly constructive. Rather than trying to predict which headline will matter next, we continue to focus on the underlying trends—and remain prepared to adjust when the evidence changes.
Ready to Explore Advance & Protect?
Every investor’s financial situation—and every financial plan—is unique.
If you’d like to learn how our Advance & Protect investment philosophy combines disciplined market analysis with comprehensive financial planning, we’d be happy to schedule a complimentary consultation.
Our goal isn’t simply to help clients pursue investment returns. It’s to provide a thoughtful, evidence-based process designed to help them navigate changing markets while remaining focused on their long-term financial goals.
Markets will always provide reasons for both optimism and concern. A disciplined process can help keep either emotion from becoming the investment strategy.
Warm regards,
The Barzideh & Nadeau Wealth Management Team
Thanks for reading! As always, we’re here to help you navigate these markets with confidence and clarity. Stay safe and informed—see you next week.
