Brooks Macdonald - Investment Bulletin 26th August 2025

What has happened

Investors’ primary focus last week was Federal Reserve Chair Jerome Powell’s prepared remarks on Friday morning at a symposium in Jackson Hole. Powell’s speech cheered markets with what was seen as a dovish tilt, boosting expectations for a Fed rate cut at the upcoming meeting on 16th – 17th September. Specifically, he stated that the balance of risk appears to be shifting in ways that “may warrant adjusting [the central bank’s] policy stance,” and that policy is currently in restrictive territory. The initial reaction on Friday was for yields on short dated 2yr Treasuries to fall by nearly 10bps and 10yr Treasuries by 7.4bps. Equities rallied, with the S&P500 moving to within 0.1% of the record high achieved on 14th August. UK equities also rallied by 2%, reaching an all-time high. This positive momentum faded on Monday as investors considered other news coming from the US, with 2yr yields rising by 3.2bps and 10yr yields by 2.5bps. Markets are currently pricing in an 83% likelihood of a cut at the upcoming Fed meeting, compared to 71% before Powell’s speech.

President Trump renews pressure on the Fed’s Governor Cook

President Trump announced the immediate dismissal of Federal Reserve Governor Lisa Cook, citing "sufficient cause" related to mortgage applications she made in 2021. Cook has rejected the dismissal, arguing that Trump lacks the legal authority to remove her and that no valid cause exists. If the dismissal stands, it could significantly shift the balance of the Fed Board toward a dovish majority, especially with the recent nomination of Stephen Miran. Gold rallied by 1% on the news and the Treasury yield curve steepened, with the difference between the yield on 2yr and 30yr Treasuries moving to 122bps, the highest since January 2022.

France Faces Political Uncertainty Ahead of Budget Confidence Vote

French Prime Minister Bayrou has called a confidence vote for 8th September to secure support for his €44bn budget tightening plan. With opposition parties and the Socialist leadership signalling they will vote against it, the minority government is expected to lose. If so, President Macron may appoint a new Prime Minister or call snap elections, with polls showing a fragmented outlook and the far-right RN currently leading.

What does Brooks Macdonald think

Investors face a busy week of US data releases includes durable goods orders and a revision to Q2 GDP, but Friday’s PCE inflation print will be the key focus ahead of the September Fed meeting. Nvidia’s earnings on Wednesday are also in the spotlight, given its outsized market impact—now accounting for over 25% of the S&P 500’s YTD return—with investor attention on margins, China sales in the light of the news that Chinese companies have been encouraged not to use its H20 chip, and AI spending by data centre companies. Over the past couple of quarters, it has delivered smaller positive earnings surprises after its stellar growth in 2023 and 2024, so any disappointment could have negative implications for the broader AI theme. 

 Source: Brooks Macdonald