A man passes by the New York Stock Exchange during a rain storm in New York February 24, 2016. REUTERS/Brendan McDermid
Index Performance
At the close of August, U.S. broad-based equity indices traded positive: S&P 500 TR (+2.02%), Nasdaq (+1.58%), Russell 2000 (+7.00%), and DJIA (+0.8%). Within the international market, equities finished August on a positive note: FTSE 100 (+0.60%), Nikkei 225 (+4.01%), and the STOXX Europe 600 gained (0.74%).
Macro Update
From the quiet peaks of Wyoming, the Jackson Hole Symposium sent shockwaves through global markets as investors strained every word through a fine-tooth comb for signs of the Federal Reserve’s next move. Chair Jerome Powell reiterated the central bank’s dual mandate to foster maximum employment and price stability, but the credibility of the objective is increasingly under scrutiny. Both unemployment and inflation are rallying, while voices from the Trump administration have grown louder in their calls for immediate rate cuts, and openly questioning the Fed’s “wait-and-see” approach.
Since May 2025, the unemployment rate has fluctuated within a 4.0% to 4.2% range before ticking up to 4.3% in August. August’s non-farm payrolls rose by just 22,000, missing the Reuters consensus estimate of 75,000. More troubling, June payrolls underwent a second downward revision, diving by 27,000 into negative territory and reaching a low (of -13,000). This is a drastic decline from its initial report of 147,000. July data offered a modest offset, revised up to 79,000 from 73,000, still well below the Reuters 110,000 estimate. The data suggests that the labor market is losing momentum far more rapidly than policymakers have anticipated. Despite weaker-than-expected labor data, markets remained resilient and continued to push into greener pastures. However, beneath the surface, one commodity is flashing a warning sign: gold.
Gold, which is known as the market’s barometer of stress, is once again rallying amid political and policy uncertainty. Entering 2025, gold climbed to new heights as the barrage of tariffs weighed heavily on global trade and recession fears mounted following a 0.6% contraction in Q1 GDP. The narrative shifted in the second quarter, with GDP bouncing back (+3.6%), yet the recovery has not been uniform. A series of coincident indicators continued to remind investors that the market is far from stabilization. A softer U.S. dollar combined with concerns surrounding the Fed’s independence propelled gold to new heights as investors sought protection from policy missteps and the mounting risk that momentum could fade at any moment.
U.S. Fund Market Summary
For August, exchange-traded funds (ETFs) dominated the flow picture, attracting $108.7 billion in net new money, more than double the $50.8 billion that went into traditional mutual funds. The preference was clear: in a volatile environment, investors gravitated towards vehicles offering intraday liquidity, tax efficiency, and lower cost structures.
U.S. money market funds stood out, pulling in nearly $100 billion as investors sought safety and cash-like yields. On the other hand, there was a marginal outflow from U.S. mixed assets and commodity funds. The most striking divergence came from U.S. equities. U.S. equity mutual funds posted $66.1 billion in outflows, while U.S. equity ETFs racked in $56.4 billion, highlighting the structural advantage of ETFs ad the preferred wrapper.
In fixed income, the story was positive across the board. Both U.S. Taxable and Municipal Bond funds drew inflows across ETFs and mutual funds alike, as investors continue to learn into fixed as the Fed’s trajectory remains data dependent.
Given the magnitude of inflows into U.S. money market funds, the U.S. Taxable Money Market classification was excluded from the graph to avoid skewing the comparative view. Even after removed this outsized classification, the fund classification remained tilted towards fixed income. Four of the five largest inflow classifications were bond-related, as investors shifted towards a defensive stance amid uncertainty surrounding favorable growth and policy concerns. The lone exception came from U.S. Developed International Market Funds, suggesting that investors are also seeking diversification beyond U.S. borders.
On the outflow side, the picture was starkly different. Equity strategies dominated the bottom five classifications, with the exclusion of U.S. Mixed-Asset Target Allocation Funds.
Looking ahead, the flow trajectory could indicate that September will follow a similar trend: defensive positioning in fixed income and money markets, with a reallocation into international markets, and investors favoring quality over high beta strategies.
