Markets stepped into the second half of August facing renewed crosswinds. While underlying fundamentals remain stable, headline-driven volatility has returned, testing the confidence of investors who had grown comfortable with the year’s upward trend. A selloff in high-growth tech stocks, fresh trade policy threats, and a surprise inflation reading out of the UK reshaped positioning across global equities. What was once a rally anchored in AI and soft-landing optimism has turned into a more cautious recalibration around valuation, policy clarity, and macro stability.
Index Snapshot (as of August 16, 2025)
S&P 500: 6,384.75 (–0.2% weekly)
Nasdaq Composite: 21,082.14 (–1.3% weekly)
Dow Jones Industrial Average: 41,223.16 (+0.1% weekly)
Euro Stoxx 600: 520.87 (–0.4% weekly)
Tech Momentum Breaks Amid AI Repricing
After leading markets for much of the year, the AI trade lost steam last week. Nvidia dropped 3.5%, Palantir 9.4%, and Arm 5% as investor appetite cooled. The selloff wasn’t triggered by earnings or guidance but by a broader reassessment of near-term valuation risk across AI-exposed stocks.
This retracement has pressured the Nasdaq, which posted its worst session since early August. Traders appear to be rotating into defensive and value plays while staying alert to further weakness in speculative tech.
Tariff Policy Back in Focus as August Deadline Nears
The Biden–Trump tariff framework continues to cast a shadow over global risk appetite. The Treasury recently revealed that tariff collections may exceed $300 billion, a sign of how embedded trade policy has become in federal planning. The August 12 U.S.- China truce deadline has passed without resolution, and though backchannel talks in Stockholm were described as “constructive,” there’s no final agreement. The White House is still weighing a new tariff structure between 25% and 50% targeting “non-reciprocal trade partners.”This has kept sectors like semiconductors, agriculture, and autos on edge, with rotation into domestic names accelerating.
Meanwhile, recent U.S.–EU and U.S.–Japan deals helped reduce uncertainty in key industries, including manufacturing and digital services, though implementation timelines remain vague.
UK Inflation Upsets the Central Bank Narrative
The UK’s July CPI report surprised to the upside at 3.8%, dashing hopes of a near-term BoE rate cut. The inflationary persistence fuelled a rally in the pound and a mild pullback in UK equities.
This development matters well beyond the UK: it served as a reminder to global markets that central banks remain data-dependent, and policy pivots are still far from guaranteed. European equities dipped modestly as rate cut expectations across the ECB also came under reassessment.
The Week Ahead: Jackson Hole, ECB, and Early September Positioning
The final weeks of August will be key in determining investor sentiment heading into September. Focus points include:
ECB Meeting (August 22): No rate change expected, but commentary on inflation trends will drive European market tone
Jackson Hole Symposium (August 22–24): Fed Chair Powell’s speech could recalibrate expectations for 2025 rate policy
U.S. Flash PMIs and Durable Goods Orders: Important signals for services strength and industrial demand
Tariff Clarity Watch: Any move from the White House or China may trigger fast rotations in globally sensitive sectors
