by Jason Bodner
August 26, 2025
Ever since the Kansas City Federal Reserve began holding its annual Jackson Hole symposium in 1982, markets have often used the central bankers' words there as a turning point in the markets. The remote setting in Wyoming has become a global stage, where a few carefully chosen phrases can move trillions of dollars across stocks, bonds, currencies, and commodities, including gold. Friday was no exception.
As I sat down to write this column, Jerome Powell delivered his final speech from Jackson Hole, and his words cracked open the door to a September rate cut. Markets responded instantly. The S&P 500 surged by 1.5%, the NASDAQ rose 1.9%, and the small-cap Russell 2000 exploded up by 3%. Oil, gold, silver, and even Bitcoin all rallied. Bond yields understandably fell, from 4.30% to 4.25% on the 10-year Treasuries.
Friday's immediate reaction was a sign of just how much investors have been craving clarity. For years, equity markets have been navigating a turbulent August, traditionally one of the bumpiest months of the year. Now, Powell's comments have provided some reassurance and a spark of positive momentum.
The Big Money Index (BMI), a measure of institutional buying, currently sits at 67%: a comfortable zone, well below the overheated 80% level that often signals exhaustion. History shows that being overbought rarely last long: The 35-year average is just 22-trading days. This summer, however, the index remained overbought for 35-consecutive sessions, a streak that ended in early August with predictable turbulence.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
As expected, the markets hit some "air-pockets" in early August. Outflows spiked briefly, but the selling proved short-lived. By mid-month, inflows returned – particularly into ETFs. The lack of broad ETF outflows is telling, suggesting that investors are still willing to embrace risk, despite temporary volatility.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Another metric worth watching is trading volume. Recent rallies have occurred on lighter participation, raising doubts about their durability, so if Friday's rebound is accompanied by heavier volumes ahead, it will confirm strength. (Stronger volume on up days often precedes a continuation of rallies).
Heading into September next week, this could matter greatly, as September has historically delivered the weakest returns. Since 1990, September has produced negative returns for equities about 60% of the time.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Earnings season has added fuel to August's volatility. Sharp price swings followed earnings releases, especially in large-cap technology stocks. This is not unusual in summer-months, when lower liquidity amplifies moves, but within the noise, a pattern emerges: Small-cap and mid-cap stocks have been steady beneficiaries.
In fact, 86% of August's inflow signals have been in small and mid-sized companies. That is bullish, suggesting investors are looking beyond the mega-cap darlings and finding value in the broader market.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Sector-level flows tell an equally interesting story. Healthcare has attracted meaningful inflows, while technology has experienced notable outflows. The contrast highlights a rotation beneath the surface, as investors adjust portfolios following blockbuster runs in technology. Some high-flying technology stocks have seen violent retracements, underscoring how quickly sentiment can shift in some of the high-flying names.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
The Road Ahead
Seasonality suggests caution in the coming weeks. September often delivers turbulence, but with the Fed now signaling policy easing, economic data holding strong and tax-related inflows providing structural support, the backdrop looks constructive. Lower rates should benefit interest-rate-sensitive areas such as real estate investment trusts (REITs), which have lagged but may soon attract yield-hungry buyers.
Beyond REITs, growth-oriented sectors appear well positioned. Technology, consumer discretionary, industrials, and financials all stand to gain from easier monetary policy. Sector rankings currently place utilities at the top, followed by industrials, technology, and financials, with discretionary in the middle of the pack. This composition may shift as investors reposition through the fall.
The stage is set for leadership from growth sectors, supported by a broader rally in equities.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Earnings Provide the Foundation
Perhaps the strongest argument for optimism lies in corporate earnings. According to FactSet, with 90% of S&P 500 companies reporting Q2 results, 81% posted both earnings and revenue surprises. Earnings are growing at an 11.8% year-over-year pace, marking the third straight quarter of double-digit gains.
Q3 guidance is mixed, with nearly an equal number of companies issuing positive and negative EPS outlooks. Even so, valuations are elevated: The S&P 500 trades at a forward price/earnings ratio of 22.1, above both the 5 and 10-year averages. While that implies some risk, markets have historically tolerated higher multiples in periods of strong growth. For now, earnings momentum provides a sturdy foundation.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Powell's Jackson Hole comments could be more than a short-term catalyst. They could be a psychological turning point. For much of the summer, markets have wrestled with uncertainty about monetary policy. Now, with the Fed about to cut rates, investors have a clear framework. Combined with resilient earnings, sector rotation into new leaders and structural inflows, the setup favors continued equity strength.
Of course, risks remain. Valuations are stretched, geopolitical uncertainties linger, and the market must navigate seasonal headwinds. But the pieces are in place for strength going into year-end. The rally that began Friday may mark more than just a relief bounce—it could be the beginning of the next leg higher.
The Stoic Perspective
It is easy to be swept up in the euphoria of green screens and surging prices. But markets, like life, are cyclical. I have been quoting Stoic philosophers on this principle in recent weeks. The Stoic philosopher Marcus Aurelius reminded us: "The universe is change; our life is what our thoughts make it."
This applies to today's environment. Markets shift – through volatility, sector rotations, or seasonal headwinds. What matters is how we interpret those changes. A resilient perspective sees turbulence not as danger, but as opportunity. Just as Powell's Friday words turned uncertainty into momentum, so too can investors transform shifting conditions into growth, provided they maintain discipline and perspective.
In other words, we cannot control markets any more than Aurelius could control the cosmos, but we can control our response, choosing patience over panic, curiosity over fear, and vision over short-term noise.
Maybe that's the Jackson Hole lesson.
All content above represents the opinion of Jason Bodner of Navellier & Associates, Inc.
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Jason Bodner
MARKETMAIL EDITOR FOR SECTOR SPOTLIGHT
Jason Bodner writes Sector Spotlight in the weekly Marketmail publication and has authored several white papers for the company. He is also Co-Founder of Macro Analytics for Professionals which produces proprietary equity accumulation and distribution research for its clients. Previously, Mr. Bodner served as Director of European Equity Derivatives for Cantor Fitzgerald Europe in London, then moved to the role of Head of Equity Derivatives North America for the same company in New York. He also served as S.V.P. Equity Derivatives for Jefferies, LLC. He received a B.S. in business administration in 1996, with honors, from Skidmore College as a member of the Periclean Honors Society. All content of "Sector Spotlight" represents the opinion of Jason Bodner
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