Stock Market Forecast: August 18 – August 22, 2025

Market Recap: Shifting Sentiment in Mid-August 2025

Despite a turbulent week from August 11 to 15, 2025, major stock indices closed the period with gains. The Russell 2000 led the charge, surging 3.24% week-over-week, underscoring robust momentum in small-cap stocks. The Dow Jones followed with a solid 1.94% gain, buoyed by the resilience of blue-chip companies. Meanwhile, the S&P 500 and Nasdaq 100 lagged behind, rising modestly by 0.86% and 1.09%, respectively, weighed down by softness in the technology sector. Still, both finished the week in positive territory.

Comparative Performance of the U.S. Indices, August 11- August 15, 2025

Source: Stock Market Data, Ki-Wealth Research

Early in the week, favorable July consumer inflation data lifted market sentiment, raising hopes for a Federal Reserve rate cut in September. However, those gains softened after a hotter-than-expected wholesale inflation report on Thursday dampened optimism for near-term easing.

Sector performance reflected a precise rotation.Healthcareled with a notable 4.89% advance, followed by Communication Services at 2.58%, while Technology slipped slightly by 0.18%. Corporate news also shaped market dynamics: Applied Materials (AMAT) saw a steep decline following weak guidance, impacting the tech sector, whereas UnitedHealth (UNH) rallied after Berkshire Hathaway disclosed a significant stake.Investors who aligned with Ki-Wealth’s highlighted healthcare picks earlier this year would now be enjoying triple-digit returns.Over the week, there was a gradual shift toward defensive sectors and a pullback from prominent tech names.

On the final trading day, August 15, futures dipped again after economic data revealed stronger-than-expected retail sales alongside a surprisingly weak Empire Manufacturing report. Inflation figures released that day added complexity for the Fed’s policy outlook. Retail sales narrowly missed estimates but were in line once auto sales were excluded, which supported hopes for a rate cut by keeping demand from overheating. Yet, import prices exceeded expectations, and Empire Manufacturing showed mixed signals: new orders rose sharply, but shipments and employment declined, while prices paid softened slightly.

University of Michigan’s inflation sentiment survey painted a less encouraging picture, with inflation expectations rising to 4.9% for the next year and 3.9% over five to ten years—figures that undercut hopes for easing inflationary pressures following the recent PPI spike. This was precisely the case that we highlighted in our latest analysis on“hidden inflation”.

Federal Reserve Governor Austan Goolsbee weighed in on Friday, expressing cautious concern about whether the economy remains on the Fed’s desired path for inflation. He emphasized the need for more data before adjusting policy and warned against overreacting to single-month fluctuations. Goolsbee also challenged the notion that tariffs cause only one-time price jumps, noting a more persistent pattern in recent price increases. While confident in overall economic strength, he flagged rising services inflation as a key risk.

With equity markets near record highs and services inflation climbing, Goolsbee’s vigilance is understandable. When people feel wealthier, spending tends to increase—a trend visible in recent personal experiences. FedWatch probabilities reflect this nuanced outlook: while a single rate cut is almost certain, the likelihood of multiple cuts is diminishing amid bond market shifts and rising 10-year Treasury yields, which recently climbed above 4.3%.

Market-implied odds as of August 15th showed strong expectations for a 25 basis point cut in September and October, with some chance for a 50 basis point cut later in the year. However, last Friday’s data suggest a pullback in those probabilities, with bond markets responding accordingly.

Technology stocks faced additional pressure following comments fromOpenAI CEO Sam Altman in a Verge interview. Altman acknowledged that the current AI enthusiasm resembles a bubble, driven by investors “overexcited” about the technology—a common pattern when smart money rallies around a kernel of truth. He cautioned that while some investors may face significant losses, others will profit, and the AI boom is expected to be a net positive for the broader economy. Reinforcing his long-term confidence, Altman highlighted OpenAI’s plans to invest trillions in data center infrastructure in the near future, signaling a strong growth outlook for the company despite short-term market volatility.

Renewable energy stocks have notably outpaced the broader market as investors turned their attention to sectors and stocks that had previously lagged. This shift propelled companies such as Sunrun (RUN), First Solar (FSLR), Enphase Energy (ENPH), and ARRY, among others, to experience significant gains. Investors who heededKi-Wealth’s clean industry researchearly this year, capitalizing on price dips, are now reaping triple-digit returns—underscoring the value of strategic focus and timely insight.

Key Economic Events and Fed Signals Set to Rock the Week of August 18

The week of August 18– August 22 is shaping up to be a rollercoaster for investors, packed with pivotal data releases and high-stakes central bank signals. First up on Tuesday, August 19, all eyes will be on the U.S. Housing Starts report. Expectations hover around 1.33 to 1.35 million units for July, suggesting a steady or slightly improved pace from June. This cautious optimism comes amid a mix of factors: mortgage rates have eased a bit (with the average 30-year fixed dropping to 6.63% in early August), housing inventory is building up, especially in the South and West of the U.S., and Congress has thrown some policy muscle behind housing supply with bipartisan legislation. Yet, don’t count out the challenges—affordability remains tight, buyer demand is softening, and broader economic headwinds like sluggish job growth and stubborn inflation could limit any big surprises on the upside.

If housing starts come in stronger than expected, look for cyclical sectors—homebuilders, construction materials, and retail giants like Home Depot, Lowe’s, and Lennar—to rally. It would signal resilience in the U.S. economy, boosting consumer confidence and potentially nudging bond yields upward as the market dials back bets on Fed rate cuts. On the flip side, a disappointing report, especially a drop in single-family starts, could weigh heavily on housing-related stocks and stoke fears of economic weakness. July’s weak jobs data (just 73,000 new jobs) and fading consumer confidence would only deepen those concerns, likely pushing bond prices higher and yields lower while fueling expectations for easier Fed policy.

Then, on Wednesday, August 20, all attention shifts to Jackson Hole. The annual Economic Symposium hosted by the Federal Reserve Bank of Kansas City carries extra weight this year, sitting in a quiet stretch between Fed meetings and serving as the unofficial policy compass for the rest of the quarter. The U.S. economy is sending mixed signals: unemployment has ticked up to 4.2%, jobless claims are climbing, and payroll revisions have been disappointing. Meanwhile, tariff-driven inflation is pushing prices higher, and manufacturing remains stuck in contraction while services barely eke out growth. Political pressure is mounting too, with the White House and Treasury Secretary openly pushing for rate cuts, putting Fed Chair Jerome Powell in a tough spot as he balances independence with soaring market and political expectations.

Investors will zero in on three main themes at Jackson Hole. First, Powell’s guidance on interest rates—markets are betting on three cuts beginning in September 2025 starting as soon as September, so any dovish signals could spark rallies in rate-sensitive sectors, while hawkish tones might trigger sell-offs. Second, Powell’s take on the inflation-growth trade-off, primarily how he interprets the impact of tariffs, is whether inflation is a temporary shock or a persistent problem. That judgment will shape the Fed’s willingness to ease. Lastly, the labor market’s role—framed by the symposium theme, “Labour Markets in Transition”—will be critical as Powell assesses rising unemployment and shifting productivity, influencing how much wiggle room the Fed has for future policy moves.

Historical Stock Market Reaction Around the Jackson Hole Event

Source: Ki-Wealth analysis

On Thursday, August 21, investors will want to keep a close eye on three critical economic indicators that could shape market sentiment and signal shifts in the broader economy.

Philadelphia Fed Manufacturing Index (August 2025)
Last month’s reading in July stood at a positive 15.9, marking a rebound after three consecutive months of contraction. Analysts expect the August figure to moderate slightly, with forecasts ranging from 12 to 16. This cautious optimism reflects ongoing challenges such as tariff tensions and easing demand. July’s data showed a strong bounce in new orders and shipments, even as input costs and wage pressures climbed. While manufacturers remain optimistic about growth over the next six months, they’re bracing for a slower pace. Should the index come in stronger than expected, it could boost confidence in the manufacturing sector and lift cyclical stocks. Conversely, a weaker reading might deepen concerns about a slowing economy.

Initial Jobless Claims (Week Ending August 16, 2025)
Jobless claims rose to 226,000 in the prior week, with forecasts now pointing to a slight increase between 228,000 and 230,000. The steady upward trend since early July highlights a softening labor market, with layoffs notably increasing in government and tech sectors. A higher-than-expected jump in claims could weigh on equities, especially those tied to consumer spending and labor-sensitive industries. On the other hand, a surprise drop might ease fears of a recession and provide support for risk assets.

Existing Home Sales (July 2025)
After a sharp June dip to an annualized 3.89 million units, July’s sales are anticipated to edge back up, with forecasts around 4.00 to 4.10 million units. Zillow projects the market will reach 4.16 million sales by year-end, a 2.5% increase from 2024. Inventory levels have risen 17% year-over-year, while home values are expected to decline by 2% by year’s end. These trends are improving buyer leverage as more listings come online and price growth slows. A stronger-than-expected sales report could boost homebuilder and real estate stocks. Weak results may signal continued pressures in housing markets, especially in areas hit hardest by high interest rates.

These indicators will provide a vital snapshot of economic health and help investors gauge where the markets might be headed in the coming months. Staying informed will be key as the data unfolds. As I highlighted above in the chart, investors should keep an eye on home sales and home starts data. The construction sector was underperforming, and we should not miss an opportunity to buy the dip on some cheap value stocks. For detailed analyses and insights, subscribe to theProfessional or Premium service.

All told, this week promises to be a defining moment, where data and dialogue could reshape market trajectories for the months ahead.

Trump-Putin Summit in Alaska: What Investors Need to Know

The August 15, 2025, Trump-Putin summit in Alaska has already begun to shape global financial markets, with effects likely to linger through the week of August 18–22. While expectations for a breakthrough ceasefire in Ukraine went unmet, the meeting still carries significant implications for investors navigating geopolitical uncertainty.

What Happened at the Summit?

The summit wrapped without a ceasefire agreement. President Trump described the talks as “productive,” yet no concrete deal emerged. President Putin underscored the need for “security guarantees” for Ukraine but stopped short of offering clear concessions. Both leaders’ post-meeting statements remained deliberately vague, leaving markets to interpret the outcome cautiously.

How Could Markets React? Scenario Breakdown

1. Maintaining the Status Quo
   Markets may see mild volatility paired with cautious optimism. Defense stocks are likely to hold steady amid ongoing tensions, while energy prices, especially oil, could remain stable or inch higher given continued sanctions and uncertainty. Financial sectors may experience little change unless sanctions escalate. Investors might price in a symbolic pause rather than a decisive resolution, keeping sentiment skeptical.
2. A Constructive Agreement (Hypothetically Speaking)
   Should a meaningful deal arise, global equities—particularly in Europe and emerging markets—could rally. Energy prices might drop as Russian oil exports increase, while defense stocks cool off with diminished threat concerns. Financial institutions, including Russian banks, stand to gain from eased sanctions. Investor confidence would rise, trimming the geopolitical risk premium.
3. Escalation or Breakdown
   A collapse in talks could provoke sharp market swings and a flight to safe havens like gold and bonds. Expect oil prices to spike amid fears of tighter sanctions or supply disruptions. Defense stocks would likely surge on anticipated spending increases, while cybersecurity firms might benefit from heightened risks; companies with Russian exposure could face headwinds. Risk aversion would deepen, especially in Europe and emerging markets.

Source: Ki-Wealth analysis

Trump-Zelensky Meeting and Upcoming Trilateral Summit: Market Implications

On Monday, August 18, a meeting between Trump and Zelensky is scheduled to take place. Trump has put forward a peace proposal involving Ukraine ceding the Donbass region to Russia in return for a ceasefire and security guarantees. Following this, a trilateral summit with Putin and Zelensky is planned for August 22. It remains uncertain whether an agreement will be reached during that meeting. Nonetheless, the summit will provide an opportunity for direct negotiations between Zelensky and Putin. We anticipate a largely neutral response from the markets over the next five trading days. The likelihood of a positive stock market movement remains at 55%.

Oil Market Watch

Ki-Wealth’s analysis highlights three critical drivers: easing sanctions would push oil prices down; sanctions tightening would send prices up; and targeting Russia’s “shadow fleet” could spark volatility. For now, OPEC+ production levels and steady global supply are keeping oil prices relatively stable despite geopolitical tensions.

Ki-Wealth’s Recommendation to Investors

In a week shaped by geopolitical uncertainty, diversification remains crucial. Pay close attention to Federal Reserve signals and inflation data, as these factors could amplify or counterbalance summit-related market moves. Energy and defense sectors remain the most sensitive barometers of ongoing developments stemming from the Alaska talks.

S&P 500 Outlook: Navigating a Strong Bullish Trend: Trading Strategy

The S&P 500 Index remains firmly in a bullish phase, consistently hitting new highs each week, making short positions increasingly challenging. Ki-Wealth’s simulation models highlight August 19 and August 22 as days with the most substantial confidence in upward momentum, likely driven by anticipated positive outcomes from recent summits and favorable macroeconomic indicators.

Projected S&P 500 Trading Range for the Week Ahead

Source: Ki-Wealth analysis

Conversely, August 21 presents the most significant risk for a pullback, reflecting uncertainties or stalled progress in geopolitical negotiations.

Despite the market’s overall strength, the recommended approach aligns with last week’s strategy: investors should consider trimming positions in top-performing stocks with elevated valuations and recent peak levels. The index’s bullish target has been adjusted to 6,550, supported by key levels at 6,366 and 6,246.

S&P 500 Index Daily Technical Chart

Nasdaq 100 Index Outlook: Navigating Volatility Ahead

From a technical standpoint, the Nasdaq 100 Index shows signs of uncertainty. On August 13, the Index hit new highs, but selling pressure at those levels suggests investors are taking profits amid elevated prices. Ki-Wealth’s simulation model indicates a period of low volatility to start the week. Monday and Tuesday are expected to be relatively calm, with a trading range near 475 points up or down, reflecting a 68% probability of such moves.

Volatility is poised to increase midweek, particularly on Wednesday, August 20, as the FOMC meeting approaches. We anticipate a wider trading range around 545 points that day. The end of the week, Thursday and Friday, is likely to bring the highest volatility, with a potential range expanding to about 570 points in either direction. This increase is driven by key economic releases including PMI data, housing reports, and the Jackson Hole symposium.

Nasdaq 100 Index Trading Range Projections for the Week Ahead

Source: Ki-Wealth analysis

For investors with low risk tolerance, it’s advisable to prepare for broader fluctuations by considering two standard deviation ranges, effectively doubling the expected range to cover 95% of potential price movements. Again, I would recommend selling the highly overvalued stocks at a profit during market strength. Please do not chase the stocks that rally to their higher-high levels. The stock market rally looks shaky and unpredictable. Value and high-quality undervalued stocks will be preferred.

Earnings to Watch This Week

Below, we’d like to highlight the most prominent earnings reports for the week.

Monday: PANW, FN, IMMR, BTDR, AGRO

Tuesday: HD, MDT, TOL, LZB, KEYS, XPEV

Wednesday: TGT, EL, TJX, BIDU, DY, LOW, NDSN, COTY, ZIM, IQ, FINV

Thursday: WMT, BILI, ZM, WDAY, INTU, ROST, VNET

Friday: BJ, BKE, UI, RLX

Top Stocks to Watch This Week: Ki-Wealth’s Stock Picks

As the Q2 2025 earnings season unfolds, Ki-Wealth highlights several stocks poised for strong performance. Analysts are showing confidence in these companies, backing them with bullish ratings and attractive upside potential.

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