“No recession from yield curve inversion has happened the same amount of months out. NOT ONE. If that doesn’t give you a clue that this was never an indicator. I don’t know what to tell you. Worst part is, if we have a recession tomorrow; nothing will matter to you. You will confirm your bias that it WAS an indicator. Your brains just work that way. No logic that I am saying right now will matter. That’s Wall Street for ya. That’s academia for ya. And yet, this number will have never happened before and you can’t see past the headlines. I mean these are some dumbfounding exercises in futility. That people will dedicate time, energy, emotions creating a dogma that proves a religion throughout history of markets. But in reality… There is absolutely NO logic that you can rationally deduce from the yield curve inversion predicting a recession any more than the Olympics do. This is why you pay those high fees for institutional research? This is why? Say this at a symposium or at a public speaking event and no one will want to talk to you. Because you literally just crapped on somebody’s research. Somebody who has been held on high praise for years…“
– Seth Golden, Chief Market Strategist at FinomGroup.com
(Contributor/Premium Members Only)
Mid-week Summary
Wednesday, August 27th, 2025
Welcome to Market Mania!
Where the latest drama is never the last, and every grin hides a little grit.
Just as summer’s heat hangs heavy, Wall Street finds itself wrestling with its own fever dream: rallying indices amid a fog of doubt, and a market tape that dances to its own tempo. The S&P 500 is circling all-time highs even as policymakers and politicians are at odds, with President Trump’s public jousts over Fed independence capturing headlines and feeding late-cycle policy anxiety. Meanwhile, Lisa Cook and her colleagues at the Fed have become the surprise protagonists, guarding the institution’s credibility as the September meeting looms ever larger.
Beneath the spectacle, this market looks more like a high-stakes card table than a merry-go-round. Bulls have held their chips, betting on the deeper resilience revealed by persistent tech leadership and a dizzying string of Nasdaq milestones—even as small caps and cyclicals underwhelm. Headline risks still swirl: Trump tariffs, global election drama, and a jittery energy complex. Yet investors keep coming back for the next hand, each time licking wounds from August’s minor stumbles and prepping for the wild card—tonight’s Nvidia (NVDA) earnings and the upcoming job numbers. One big card, played right or wrong, and the table may tilt anew.
The irony of this market is that the more uncertainty surrounding Powell and the path of rates, the more methodical the price action has become. Every index retreat has drawn fresh buyers, as if the crowd has finally stopped waiting for a simple narrative to “make sense of” the cycle and instead settled into managing risk, sector rotation, and opportunities within the noise. With volatility plumbing new lows and breadth splits keeping everyone honest, each day’s news has become less of a catalyst, more of a sideshow.
If there’s a lesson this August, it’s that flexibility and process are trumping prediction. Market participants who keep their feet under them—tracking sector leadership, earnings momentum, and real data—are thriving while those chasing headlines are left gasping for air. I’m talking to you Dan Nathan and Guy Adami! With NVDA’s print and labor data set to reset the tone for September, the message heading into the fall is: keep your edge, stay humble, and remember that in 2025, the only constant truly is change.
As always, this edition pulls together the tufts of fact, the twist of narrative, and the signals that matter—so smart positioning can triumph over noise.
Onward.
Chart(s) of the Week
🏆 Today’s Chart of the Week was shared by Seth Golden (@SethCL):
Fed cutting cycles WITHOUT a recession:
✅ Large caps lead
☑️Mid caps follow
🚨Small caps LAG
🔶Only cutting cycles where Small Caps lead is WITH
recession$SPX $SPY $QQQ $MID $NYA $IWM $RTY $RUT $DIA pic.twitter.com/gEU06UYq0d— Seth Golden (@SethCL) August 26, 2025
Today’s must-see chart comes from Seth Golden (@SethCL), who highlights a critical nuance often missed in the Fed policy playbook: when the Fed cuts rates but the economy AVOIDS a recession, it’s not small caps or mid caps that lead—but large caps.
According to the new research Seth shares (sourced from BofA US Equity & Quant Strategy with University of Chicago data), large caps decisively outperform other size segments during non-recessionary Fed easing cycles. The chart tracks the average returns for large, mid, and small caps in the twelve months after the first rate cut across past cycles since the 1970s—indexed to the date of the initial cut.
Key takeaways:
• In these non-recession “soft landing” cycles, large caps (think S&P 500 giants) are the clear leaders, with performance staying above both mid and small caps throughout the year after cuts begin.
• Mid caps follow, while small caps consistently lag—contrary to popular narratives that easing alone is enough to spark a small-cap resurgence.
• The mistaken belief that the only periods where small caps lead is after the Fed starts easing is WRONG. Historically, that leadership occurs during actual recessions, not soft landings.
What does this mean for today’s market?
With markets widely anticipating rate cuts in the coming months—even as economic data continues to avoid outright recession—this historical pattern suggests investors should stay focused on quality and scale. Large caps and blue chips, which have already driven much of the rally this cycle, may continue to dominate if the Fed engineers a soft landing. Meanwhile, waiting for small-cap catch-up purely on the basis of monetary easing may prove frustrating—unless the data meaningfully tips toward recession (which, as of now, it hasn’t).
Context for 2025:
• The S&P 500 and Nasdaq remain near all-time highs, bucking the inflation trend (seemingly), driven by large-cap strength amid policy uncertainty and resilient earnings via realized EPS and fwd estimates.
• Breadth in small caps continues to underwhelm, echoing what this chart demonstrates: in non-recessionary easing cycles, size and quality matter most.
• The message here is classic yet timely—not all Fed cuts are equal, and market leadership during easing depends on the macro backdrop.
Bottom line:
If history holds, investors seeking leadership from small caps may need to see deeper economic weakness first. For now, in a Fed-cutting, no-recession world, large caps remain the safe—and smart—bet.
BONUS:
#Recession risk made simple
With 1 exception, before a recession begins stock prices $SPX $SPY peak and turn down, while initial #jobless claims turn up +10% or more Y/Y. Only 1 exception!
All else is an exercise in "look at how smart I am to get this deep into useless weeds." pic.twitter.com/5gFzLDEZ8c
— Seth Golden (@SethCL) August 12, 2025
The hope for small-caps lay within the reality of Fed cutting rates. Small-caps > Large-caps only after 1st rate cut AND… only if a slow/methodical rate cutting cycle, as yield-curve proves more favorable for Small-caps.$SPX $RUT $RTY $SPY $IWM pic.twitter.com/cd9OZsnYL5
— Seth Golden (@SethCL) February 9, 2024
Thought this one was interesting from last night's @dailychartbook email from @bespokeinvest. They note that since 2010 the Friday breadth for the RUT was in the 99th %ile something that's only happened 11 times previously.
You can see from the table that the returns are very… https://t.co/bATQMjLdlY pic.twitter.com/hS3ZTB0A4R
— Neil Sethi (@neilksethi) August 27, 2025
Quote(s) of The Week
Quote of the Day –
“If you can go through life without experiencing pain you probably haven't been born yet.” – Neil Simon— Bespoke (@bespokeinvest) August 26, 2025
“Compounding is the eighth wonder of the world, but it only works if you give it time.”
— Sean D. Emory (@_SeanDavid) August 24, 2025
"My enemy is not the man who wrongs me, but the man who means to wrong me."
"Poverty in a democracy is much more preferable than what is called 'prosperity' under despots."
"An unexplored life, is not worth living.”
– Democritus (2400yrs ago) pic.twitter.com/51jGiug5IH
— Finom Group AYNI Luis Solórzano (@aynirealtor) August 24, 2025
“Humility is not thinking less of yourself, but thinking of yourself less.” – C.S. Lewis
— ambassador of qwan (@ambofqwan) August 24, 2025
Markets and volatility pic.twitter.com/WvwJ56a8nt
— Chris Ciovacco (@CiovaccoCapital) August 23, 2025
Cultivate patience. pic.twitter.com/r7JFkJ2V68
— Reads with Ravi (@readswithravi) August 23, 2025
Top 10 Tweets of The Week
Is this disinflationary? Asking for a friend.
"For the first time in years, home prices are failing to keep pace with broader inflation" – @SPDJIndices pic.twitter.com/sPPGjgswF2
— Sam Ro 📈 (@SamRo) August 26, 2025
PPI data for machinery & equipment goods suggests that orders volumes growth has also picked up!
The recent pick-up in durable goods orders, which were up by almost 5% in 3m/3m annualised terms in July, suggests that firms are shrugging off concerns about policy uncertainty pic.twitter.com/CvovhghV19
— Stephen Brown (@economy_steve) August 26, 2025
Since I know many of y’all are NOT a fan of analogues given their seemingly large potential to diverge amidst endogeny, WHAT SAY YOU NOW?
Here's a look at the ChatGPT vs. Netscape comp for the Nasdaq that we first started monitoring in early 2024… pic.twitter.com/VKMqsryW9l
— Bespoke (@bespokeinvest) August 26, 2025
Are you ready for $NVDA earnings? Remember, HOPE is not a hedge, CASH is, and your job as an investor is to do less of that hoarding stuff and more of the putting the capital to work stuff! 🤑
🏆 Best Labor Day week stocks:$ORLY, $MMC, $AZO, $DUK, $SYK, $ORCL, $MCD, $TGT, $LLY, $CVS
💀 Worst Labor Day week stocks:$DVN, $ENPH, $ANET, $AMD, $AAPL, $NVDA, $TER, $OXY pic.twitter.com/huqJPxR7jr
— Schaeffer's Investment Research (@schaeffers) August 27, 2025
Because who doesn’t love a 100% positivity rate, 3 months forward = any prices cheaper until Nov 21st screaming buy that fat, September pitch bro!
Nasdaq 100 $QQQ recent 6-day losing streak is likely a net positive, which may prove highly relevant to those considering $NVDA's ER in focus.
3 month's after 6-day losing streak, was positive 100% of time, avg. return of +8%, since 2012.$NDX $TQQQ $AAPL $MSFT $TSLA h/t… pic.twitter.com/2nqwtz3Czc
— Seth Golden (@SethCL) August 27, 2025
“No such thing as a super-cycle if inflation is transitory.
The allure of commodities is what folks in equities fear the most. Big drawdowns. Price historically goes NOWHERE with commodity futures.
So you’re not having to worry about “crash” in commodities. Very controlled. Not a lot of vol.
Comfortable place.” – Seth Golden
Through July, a conspicuous spike in $RIND (+7.3% YTD) is confirmed by 2 other commodity price gauges (in sharp contrast to CPI & PPI). This is worrisome as rising input costs could hinder CPI's progress to 2% pic.twitter.com/gJHilSdNu1
— The Leuthold Group (@LeutholdGroup) August 26, 2025
Is this time any different, or is every time uniquely different? You choose.
Schrödingers market:
Notice how your own bias belief precondition subconsciously influence your interpretation
Cognitive dissonance to confirm prior beliefs
Objective referent is extremely hard to get due to your own assumptions
When the NASDAQ A/D line peaked (as shown by the red lines), it often led to pauses in the NASDAQ — and at times to larger pullbacks.
Most recently, we saw this in the summer of 2022 during the bear market.
And again in the summer of 2023, which produced about three months of… pic.twitter.com/5a7g8rTbf2
— Frank Cappelleri (@FrankCappelleri) August 26, 2025
The last -3% pullback was May 23, 2025.
Have now gone 62 days without a -3% pullback
Mean amount of days w/o -3% pullback in secular bull is just 26 days.
Longest period ever, through 2017 into February 2018
Now nearly 3x longer than mean w/o pullback
(closing basis)$SPX… pic.twitter.com/pOyhzGMZmO— Seth Golden (@SethCL) August 24, 2025
SUPPOSED TO HAPPEN? 😉 🫵
Consumers see increasing slack in the jobs market. The Labor Differential continues to soften, falling to a fresh low of 9.7 in August. In particular, we saw a notable jump in those saying “jobs hard to get.” pic.twitter.com/wOJn7B0bMd
— RenMac: Renaissance Macro Research (@RenMacLLC) August 26, 2025
The lifeblood of this market is rotation, rotation, rotation.
Some give back today from Friday's Powell-induced rally, but bigger message from recent weeks remains: rotation.
The DJIA made its first record high of the year on Friday. Removes one of the arguments that the rally was too narrow (which we never agreed with). @NDR_Research 1/4 pic.twitter.com/Kinpr93p9o— Ed Clissold (@edclissold) August 25, 2025
AVERAGES ARE JUST THAT, JUST AN AVERAGE… (I personally prefer median data when it comes to these regards) Lesson nevertheless!
The stock market’s average total return is 10% per year. But don’t mistake that for consistency.
Over 97 years, returns were within 2% of that number just 4 times.
Lesson? Compounding comes in lumpy, unpredictable bursts.
Video: https://t.co/Qj3g6bdfZX pic.twitter.com/oo43Q9riSF
— Charlie Bilello (@charliebilello) August 24, 2025
Are you cutting the blooming flowers 🌹 and watering the weeds?
As @fundstrat points out, there's a ton of turnover in the S&P 500. This is critical to understanding its performance. pic.twitter.com/K3RjDCAXaw
— Sam Ro 📈 (@SamRo) August 23, 2025
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