Image credit: Microsoft Copilot Designer.

The week's biggest market moving news came on Friday, 22 August 2025, when Federal Reserve Chair Jerome Powell opened the door to the Fed resuming interest rate cuts. Investors were buoyed by the news, which boosted the S&P 500 (Index: SPX) to 6,466.91 by the close of trading that day, ending the week almost 0.3% higher than it closed out the preceding week.

But to put the news into closer focus, the S&P 500 jumped 1.5% on Friday, having fallen throughout the week, primarily between Tuesday, 19 August and Thursday, 21 August.

The latest update suggests investors reset their forward-looking focus during the week to the more distant future quarter of 2026-Q2 in setting current day stock prices. We find the trajectory of the index is at the lower end of the typical range the dividend futures-based model behind the chart would place it.

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The heightened focus on Powell's speech at the Fed's annual retreat to Jackson Hole, Wyoming accounts for the market's sharp reaction on Friday, 22 August 2025. The CME Group's FedWatch Tool indicates investors now anticipate the Fed will cut the Federal Funds Rate by a quarter percent at its 17 September (2025-Q3) meeting. Going forward, the FedWatch tool forecasts additional quarter point rate cuts will take place on 29 October (2025-Q4), 10 December (2025-Q4), and 28 January (2026-Q1).

Should investors shift their time horizon inward to the nearer term, the rally in stock prices could continue. How high stock prices might rise in that event would be determined by how far into the future they might shift their focus. If that doesn't happen and investors stay focused on 2026-Q2, then stock prices will mostly move sideways within a relatively narrow range.

For a significant continued rally, something will need to happen to reset investors' time horizon. That, in turn, will depend on the random onset of new information which the market moving news of the week will document. Speaking of which, here are the past week's headlines:

There is one potential concern that can upset the future we've described. Should the S&P 500 run into a new market regime, all bets would be off. Changes in market regime is something the dividend futures-based model can identify, but cannot anticipate in advance, even though it can explain upwards of 90% of how stock prices behave otherwise. In terms of modeling how stock prices work, it's the remaining frontier.

The Atlanta Fed's GDPNow tool projection of real GDP growth in the U.S. during the current quarter of 2025-Q2 dipped to +2.3% after clocking in at +2.5% in the preceding week.

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