The Monday Report – 18 August 2025

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The Australian market closed at another record last Friday. With August earnings season moving into full swing this week, the ASX200 futures are pointing to a weak opening after a mixed performance on Wall Street.

There's lots to digest in the week ahead overseas, including the fate of Ukraine, Jackson Hole Symposium and more US earnings.

Locally, the August season is finally ramping up in full force. See also: https://fnarena.com/index.php/reporting_season/

Good Morning,

The ASX200 reached another record hit, for the fifth consecutive session on Friday. It advanced 65 points or 0.7% to close at 8938.6.

Nine of eleven sectors rose. Technology lagged while banking and mining stocks led the gains.

What happened last Friday, Tony Sycamore, IG extract

The Nasdaq and the S&P500 finished lower on Friday, while the blue-chip Dow Jones reached a record high, roughly eight weeks after the Nasdaq and S&P500 achieved their own milestones. The rally in the Dow was supported by gains in UnitedHealth Group following Berkshire Hathaway’s disclosure of a major stake. For the week, the Dow gained 770 points, or 1.74%. The S&P500 rose 0.94% to 6,449, while the Nasdaq100 added just 0.43%. 

With investors rotating out of the frothy tech sector, prompted by rich valuations, softer earnings for AMD, and the recent announcement of government export taxes on Nvidia and AMD, the Dow and the Russell2000 are seen as better positioned to benefit from a broadly resilient economy, reduced trade uncertainty, and the outlook for easier monetary policy. 

Friday night’s economic data painted a generally positive picture. July retail sales data was strong, with the Retail Control Group, a key contributor to GDP, rising 0.5%MoM versus the 0.4% expected, alongside an upward revision to June’s data from 0.5% to 0.8%. 

However, this was offset by a softer-than-expected University of Michigan Consumer Sentiment Index, which fell to 58.6 in August from 61.7 prior, and well below the 62 expected. Raising concerns around stagflation, one year ahead inflation expectations surged to 4.9% from 4.5%, and long-term expectations increased to 3.9% from 3.4%. The pricing of a September Fed rate cut declined to around 84%, down from highs of 105% after last Tuesday’s CPI print. 

Zooming out, large and unprecedented shifts in US trade and immigration policy are expected to weigh on US GDP. Despite this, a healthy underlying cyclical backdrop, combined with additional fiscal and monetary easing, is expected to support growth.

Looking ahead Chair Powell’s comments at this week’s Jackson Hole Symposium will be closely scrutinised. It’s likely he will remain non-committal and data-dependent, especially with one more payroll and CPI report before the September 17th FOMC meeting with payrolls expected to be the deciding factor.

Q2 2025 earnings season continues this week with earnings reports scheduled from giant retailers Home Depot, Target, and Walmart. 

Ed Yardeni, Yardeni Research extract

The 2025 Jackson Hole Economic Policy Symposium will focus on “Labor Markets in Transition: Demographics, Productivity, and Macroeconomic Policy.” The symposium is scheduled for August 21-23. It’s an annual event hosted by the Federal Reserve Bank of Kansas City in Jackson Hole, Wyoming, bringing together central bankers, policymakers, economists, and academics to discuss important economic issues and long-term policy challenges. 

Fed Chair Jerome Powell will speak at 10 a.m. on Friday, August 22. His speech is titled “Economic Outlook and Framework Review.” So he will likely discuss the current controversies about the economy, the labor market, inflation, and how the Fed should respond to them. Will he turn more dovish in reaction to July’s weak jobs report? Or will he remain hawkish by reiterating that the Fed is in no rush to cut the federal funds rate because inflation remains about a percentage point above the Fed’s 2.0% YoY inflation target?

Odds are that he will be more of an owl—waiting and watching—than either a hawk or a dove. In other words, he’ll say that a Fed rate cut is possible at the September meeting, but the Fed’s decisions are data-dependent.

Before the September 16-17 meeting of the FOMC, July’s PCE inflation rate will be released on August 29. So will August’s CPI on September 11. In addition, August’s employment report will come out on September 5. Our hunches are that inflation will be hotter than expected and payrolls will be better than expected. If so, then the FOMC should vote to pass on a rate cut with perhaps three dissenters. This is clearly a contrarian view currently.

August’s stock market rally has been driven by a better-than-expected Q2 earnings reporting season. At the start of the season, industry analysts expected a 3.5% YoY increase in S&P500 earnings per share. So far, it is tracking at 10.6%. A similar upside surprise occurred during Q1’s earnings reporting season.

S&P500 forward earnings per share (the time-weighted average of analysts’ consensus estimates for this year and next) rose to yet another record high of US$289.86 during the week of August 14.

Mounting expectations of a Fed rate cut in September this past week triggered a broadening of the bull market, with a rotation from LargeCaps to SmallCaps and MidCaps (a.k.a. SMidCaps) and from Growth into Value. We certainly welcome such a broadening and recommend focusing on the S&P500’s SMidCap Financials, Industrials, and Information Technology sectors.

Jackson Hole this year is about a market standing on tiptoe, drunk on its own anticipation. Stocks, crypto, gold — all sitting at or near all-time highs. Why? Because the street is convinced Powell is about to join the global 2025 central-bank rate cut jamboree. Valuations are stretched taut, and the only thing traders see standing between them and more upside in equities is the sticker shock of how far we’ve already run.

The logic is simple: the Fed is expected to short-circuit labour market weakness before it metastasizes, while at the same time bailing out Uncle Sam’s debt math. With the average maturity of U.S. government debt hovering around 5–6 years, the Treasury’s Achilles’ heel is the 5-year yield. That needs to fall below 3.1% to keep annual interest payments from ballooning past US$1.2 trillion.

In other words, Powell isn’t just managing the cycle, he’s getting pressured to manage solvency optics for the world’s biggest borrower.

Stepen Innes, SPI Asset Management

So here we are, the tape stretched high and tight into Jackson Hole, every desk long risk, every trader pre-gaming the dovish sermon. Which is why “sell the news” calls have such bite. A dovish Powell at Jackson Hole may well mark the end of the rumour and the start of the profit-taking. The market has already inhaled the liquidity fantasy; the speech itself risks being nothing more than a spark that sets off the rebalancing bonfire.

This isn’t a hawk-versus-dove showdown, it’s a case study in positioning risk. When the whole theatre is packed shoulder to shoulder, even a whisper of disappointment can send the crowd racing for the exits. The irony is that Powell could give the market exactly what it wants, dovish coos, talk of easing, and yet the reflex could still be sell-the-fact, because the juice has already been squeezed into the price.

And while equities are laying out the confetti for the Fed to join the global easing parade, the policy debate has begun to twist into darker, stranger shapes. It’s not just about whether Powell delivers a -25bps or -50bps anymore. The whispers now circle around Fed independence itself, the sanctity of the central bank wobbling like a chair with one leg kicked out.

Some corners of the street are daring to float what was once heresy: a higher inflation target, the idea that the Fed should simply move the goalposts rather than fight tooth and nail to defend the old ones. Others flirt with sectoral price controls, a throwback to 1970s economic witchcraft, where policymakers pretend they can command markets like generals ordering troops. Then there’s the perennial ghost that won’t die, a gold revaluation, the notion that when the monetary plumbing jams, the answer is to reset the collateral that underpins the whole machine.

And of course, the topic that makes old hands like us smirk: Yield Curve Control. For years, we were the lonely contrarians pounding the table, dismissed as if we were muttering about UFOs at the bar after hours. Now, the consensus is coming full circle, nodding along, as if they were always there. The great irony of markets, what starts as a heresy shouted into the void eventually becomes policy orthodoxy. The cycle of ridicule, resistance, and reluctant acceptance could play out yet again.

Curate this stew of unconventional policy chatter — higher inflation tolerance, flirtations with gold resets, yield curve shackles — and you get the roadmap for capital allocation in the back half of the 2020s. In turn, it drives bigger flows into gold and crypto, as investors hedge not just against rates but against the rules of the game themselves being rewritten. The tape is chasing liquidity in the here and now. Still, beneath it, tectonic debates about monetary architecture are quietly steering the longer-term money toward hard assets and higher-beta plays.

Finally, Nvidia isn’t just a stock anymore, it’s a cornerstone of the national arsenal. The market’s begun to sense it, whispering that this isn’t 2008 “too big to fail” banking drama, but something far more strategic. Nvidia has become the silicon spine of America’s security complex, and that makes it untouchable in ways a busted bank never was.

Chips are the new oil, and GPUs are the refined jet fuel. Every Pentagon war game, every AI-driven surveillance tool, every neural net built to sniff out cyberattacks is plugged straight into Nvidia’s pipeline. Strip away its chips and the military-industrial machine wheezes. This isn’t Wells Fargo with dodgy mortgages, this is Lockheed Martin with semiconductors, Raytheon with CUDA cores.

Washington knows it. That’s why the policy scaffolding around Nvidia looks less like industrial strategy and more like national defense doctrine. Export bans choke off China’s access. Subsidies keep fabs humming on U.S. soil. Regulators, who gleefully try to chop tech down to size in other corners, tiptoe around the GPU throne. There’s an unspoken understanding: Nvidia isn’t just another ticker; it could even become a state asset flying under a corporate flag.

For traders, that adds a twist of irony. Markets are supposed to price risk, but with Nvidia, there’s an embedded option, the national security put. Uncle Sam won’t let it fail because failure doesn’t mean shareholder drawdown; it means strategic paralysis. Every headline about AI, every soundbite about the U.S.–China tech rivalry, is a bid for Nvidia’s stock.

You can fade exuberance at the edges, sure, but shorting Nvidia outright is like shorting the aircraft carrier fleet. You’re not just fighting earnings momentum; you’re betting against U.S. defense policy. The tape knows it, the flows know it, and deep down, even the bears know it. Nvidia isn’t priced just on demand curves and product cycles anymore, it’s priced on the geopolitics of staying ahead in the AI arms race.

In 2008, it was the banks that the government couldn’t let topple. In 2025, it’s silicon. The too-big-to-fail moment has gone digital.

Corporate news in Australia

-Amcor ((AMC)) is reported as selling its US$1.5bn drinks packaging unit with the soda drink slump.

-The Australian Government may bid for Healthscope to add it to the public health system.

-Iress ((IRE)) is under pressure from major shareholders to engage with private equity bidders.

-PC Gold, owner of the Spring Hill mining project in the NT is looking to IPO with a market cap of $65m-$75m.

The Federal Court is handing out its multi-million dollar penalty for Qantas Airways ((QAN)) due to the illegally sacking of 1600 workers during the pandemic.

On the calendar today:

-EZ June Trade Bal

-A2 MILK COMPANY LIMITED ((A2M)) earnings report

-AUDINATE GROUP LIMITED ((AD8)) earnings report

-AMPOL LIMITED ((ALD)) earnings report

-AURIZON HOLDINGS LIMITED ((AZJ)) earnings report

-BLUESCOPE STEEL LIMITED ((BSL)) earnings report

-CHARTER HALL RETAIL REIT ((CQR)) earnings report

-DIGICO INFRASTRUCTURE REIT ((DGT)) earnings report

-GPT GROUP ((GPT)) earnings report

-GWA GROUP LIMITED ((GWA)) earnings report

-INTELLIGENT MONITORING GROUP LIMITED ((IMB)) earnings report

-IRESS LIMITED ((IRE)) earnings report

-LENDLEASE GROUP ((LLC)) earnings report

-NATIONAL AUSTRALIA BANK LIMITED ((NAB)) earnings report

-NEW HOPE CORPORATION LIMITED ((NHC)) earnings report

-OOH!MEDIA LIMITED ((OML)) earnings report

-SEEK LIMITED ((SEK)) earnings report

-SHAPE AUSTRALIA CORPORATION LIMITED ((SHA)) earnings report

FNArena’s four-weekly calendar: https://fnarena.com/index.php/financial-news/calendar/

The Australian share market over the past thirty days…

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