Economy Slows, Stocks Soar - A Market Paradox Explained

Eagle Wealth Management |
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Weekly Market Commentary
 
 

 

Hello,


What if we told you the economy is slowing… yet investors are cheering?

Sounds backward, right? But it’s happening in plain sight.

Look around. Fewer “Help Wanted” signs. Quiet shifts at your favorite restaurant. Friends delaying big purchases.

You’re not imagining it. The data says the slowdown is real:

  • 73,000 jobs added in July (well below expectations)1
  • 258,000 jobs erased from prior months after revisions1
  • 4.2% unemployment, the highest in two years1
  • 1.97 million continuing jobless claims, the most since late 20212
  • Weak factory data pointing to manufacturing cutbacks3

And yet, the S&P 500 keeps breaking records. It’s already up more than 8% year-to-date.

So what is going on? Let’s break it down into three big reasons that are possibly driving the market right now.

1) Lower rates are on the table

Thanks to the recent swath of weak numbers, investors are speculating that the Federal Reserve could start slashing interest rates later this year.4

Think of the Fed as the country’s financial thermostat. If the economy is cooling too much, it turns up the heat.

Lower rates make it cheaper for companies to borrow and invest. They also make bonds less appealing, which pushes more money toward stocks.

Imagine a seesaw. On one side: stocks. On the other: bonds. Lower rates tip the balance toward stocks.

That is why bad economic news can sometimes push markets higher. Investors are betting the Fed will step in.

2) A few giants carry the market

The “Magnificent 7” — Apple, Microsoft, Amazon, Alphabet, Nvidia, Meta, and Tesla — have powered much of this year’s rally.

In the second quarter, analysts project these companies will see their earnings jump 14.1% year-over-year. The other 493 stocks in the S&P 500, by comparison, expect to report earnings growth of 3.4%.5

Because the Magnificent 7 make up such a large share of the index, their wins can lift the market even if many companies are struggling.

This concentration means a diversified portfolio might not mirror headline market moves, and that's actually a good thing. It shows you’re not betting everything on a handful of tech giants.

3) Money is still flowing in

Years of stimulus and government spending have left plenty of cash in the system. That money has to go somewhere.

Investor sentiment matters, too.

Over the past decade, many have been conditioned to buy the dip because markets have often bounced back quickly. Combine that with the ease of app-based trading, and rallies can feed on themselves.

Think of it like a campfire. The wood is already stacked. It only takes a small spark for the flames to rise.

The bottom line

These three forces, rate cut expectations, a handful of dominant companies, and strong investor sentiment, can push markets higher even when the economy might be slowing. All of them are tied to expectations and human behavior, not just today’s numbers.

That is why chasing headlines is risky.

It is also why emotional decisions can derail a well-built plan.

Our role is to help you interpret the headlines, not react to them. To show how market moves reflect both economics and psychology.

And to help you make choices that align with your long-term goals and values.

Markets will always swing. Your plan should help keep you steady.

If you are wondering how this environment fits with your strategy, let’s talk. Reply to this email or give us a call — we’re here to help.

In partnership,

Your Eagle Wealth Team
 

 

Chad Staskal Teaching at COCC
 

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It’s the perfect time for your family and friends to check out our in-person classes at Central Oregon Community College. Forward this email to have them check out our website for more details.

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**These courses are not intended for current clients. The planning we’ve done with you through personal meetings far exceeds what’s possible in a classroom of students. Please remember though, if you’ve had any changes in your life that may affect your current plan, please call us so we can discuss and make any necessary updates. 

 

Grown-Ups Are Going Back to Camp

Remember friendship bracelets, campfires, and late-night stargazing? Adults are heading back to camp—but this time, with better coffee and no curfews. From week-long retreats to quick weekend escapes, adult summer camps are making a serious comeback.
 
What’s fueling the surge? A mix of nostalgia, community, and the growing desire to unplug and recharge.6 For many, it’s a chance to swap screen time for lakeside hikes, creative workshops, or simply connect with new people in a low-pressure setting.
 
It turns out joy, curiosity, and connection don’t have an age limit.

Find out more!

 


The Week on Wall Street

Stocks rose last week despite mixed signals on inflation as investors kept one eye on the Fed’s September meeting.

The Standard & Poor’s 500 Index advanced 0.94 percent, while the Nasdaq Composite Index added 0.81 percent. The Dow Jones Industrial Average rose 1.74 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, increased 2.16 percent.7,8
 

Third Gain in Four Weeks

Stocks posted modest losses to start the week as investors braced for July consumer inflation reports. The White House’s executive order on Monday extending the tariff deadline for China by 90 days failed to move markets in the other direction.9

Stocks then staged a two-day rally following the latest Consumer Price Index (CPI) report, which showed July inflation held steady over the prior month—beating expectations. The inflation news led some investors to move into small-cap stocks, with the Russell 2000 Index of small-cap stocks rising 5 percent over Tuesday and Wednesday.10

However, markets slipped Thursday as investors dug into the Producer Price Index (PPI) for July, which showed wholesale inflation hit a 3-year high last month; this was the third weekly gain in the past four weeks for each of the three major averages; the S&P and Nasdaq advanced four of the last five weeks.11,12,13
 

A Mixed Inflation Story

Inflation continues to give mixed signals, which can unsettle investors who anticipate the Fed adjusting rates at its September meeting.

Last week’s CPI report showed that “headline” (retail) inflation held steady. Stocks rose in response, even though core inflation—excluding volatile food and energy prices—was hotter than economists expected.

Two days later, the PPI report revealed that inflation began to creep into wholesale prices in July. Stocks fell in response as investors processed the conflicting reports.14,15

 
  1. BLS, 2025 [URL: https://www.bls.gov/news.release/pdf/empsit.pdf]
  2. Department of Labor, 2025 [URL: https://www.dol.gov/ui/data.pdf]
  3. ISM, 2025 [URL: https://www.ismworld.org/supply-management-news-and-reports/reports/ism-report-on-business/pmi/july/]
  4. Reuters, 2025 [URL: https://www.reuters.com/business/jpmorgan-brings-forward-fed-rate-cut-forecast-september-2025-08-08/]
  5. FactSet Insights, 2025 [URL: https://insight.factset.com/are-magnificent-7-companies-still-top-contributors-to-earnings-growth-for-the-sp-500-for-q2]
  6. CBS News, July 30, 2025 [https://www.cbsnews.com/news/adult-summer-camps-surge-interest/?utm_medium=email&_hsenc=p2ANqtz-8w4N_HiFaZAXqnj28e1vnTOxkg3VfqpBUOJI-ai8aYDDYZxg3J68pmdCHZX_iJZnqD6ojWme3lh_2kFB2N6squRoTEsg&_hsmi=374626653&utm_content=373860540&utm_source=hs_email]
  7. WSJ.com, August 15, 2025
  8. Investing.com, August 15, 2025  
  9. CNBC.com, August 11, 2025
  10. CNBC.com, August 13, 2025
  11. MarketWatch.com, August 14, 2025
  12. WSJ.com, August 15, 2025
  13. WSJ.com, August 15, 2025
  14. CNBC.com, August 12, 2025
  15. MarketWatch.com, August 14, 2025

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