Moving Target
By Crest Capital Advisors on August 4, 2025
Dow: (2.92%) to 43,588.58
S&P 500: (2.36%) to 6,238.01
Nasdaq: (2.17%) to 21,650.13
Russell 2000: (4.17%) to 2166.78
Bitcoin: 113,790
10 Year Yield: 4.22%
Outperformers: Utilities 1.52%
Underperformers: Materials (5.40%), Consumer Discretionary (4.54%), Healthcare (3.86%)
US markets were lower this week as the upward momentum finally gave way at week’s end. The primary catalyst for the outsized selling was a disappointing July nonfarm payrolls report and sharp downward revisions to prior months. This growth concern pre-empted some solid Big Tech earnings that reinforced the AI secular growth story along with trade uncertainty removal as several notable deal announcements were achieved. Hawkish comments (We have a lot more to say on this below) from Powell midweek weighed on sentiment as well.
The June FOMC meeting, which concluded on Wednesday, drew significant attention due to some hawkish takeaways. Rates were held at 4.25-4.50% as expected, though Governors Waller and Bowman dissented in favor of a 25 bp cut. Most analysts’ focus was on Powell’s press conference, where he offered no signals of a potential September cut. He stated inflation remains slightly above target and the labor market is strong, adding that restrictive policy doesn’t seem to be slowing the economy. Following the conference, the odds of a September rate cut dropped to ~40% from ~55% beforehand.
That all changed on Friday with the arrival of the July jobs report. September rate cut odds quickly jumped from 40% to 90%. Is this what dissenting Fed Governors Waller and Bowman meant in their statements this morning when they worried about “stall speed”? Markets have now gotten back in line with our view; quickly recalibrating this morning from 40% odds to 90% odds of a September cut. This leaves room for at least two rate cuts this year, no matter how angry Powell is with Trump. And speaking of Powell, we’ll stop short of calling him political, but we have taken note of how the goal posts seem to be constantly in motion with him.
Here We Grow Again
Crest Capital Advisors, a Multi-Family Office serving Private Markets Asset Management Professionals and Corporate Executive families, is thrilled to announce the addition of Ted Bowen to the Crest platform.
Ted Bowen brings over 20 years of experience advising Private Equity industry executives and legal professionals on investment management and estate optimization, and joins Crest Capital to augment the group’s strategic capabilities as a Multi-Family Office for select General Partner families.
“We are thrilled to welcome Ted to our team at Crest Capital. Having known Ted for more than a decade, our group has a deep appreciation for his dedication to clients and integrity as a partner. Ted and his business will add meaningful value to our group’s Private Markets capabilities and will expand our team’s investment opportunities.” – Drew Nordlicht, Managing Partner of Crest Capital Advisors
This move further supports Crest Capital’s momentum which has been bolstered by Hightower’s strategic acquisitions of GMS Surgent Tax Solutions and NEPC, an institutional investment consultant with more than $1.8T Assets Under Advisory. Together, these developments expand Crest Capital’s platform nationally in delivering institutional investment management services, in-house tax advice, and concierge Family Office solutions tailored to families with complex business interests.
Ted Bowen’s addition also represents a key milestone in Crest Capital’s growth trajectory while deepening its presence across the Private Markets amidst the group’s expansion to New York, Chicago, and Florida.
Welcome Ted!
Powell’s Policy Pivot: From “Data Dependent” to “Confidence Theater”
“We will be data dependent.” — Jerome Powell, countless times between 2022 and 2024
For over two years, Chair Jerome Powell assured markets the Fed’s policy stance would be guided by data. Inflation, jobs, wages, supply chains, whatever the indicator, the Fed was watching.
Responsiveness, not rigidity, was the guiding principle. But somewhere along the way, that promise dissolved into abstraction. The new buzzword? Confidence. A vague, unquantifiable, and increasingly convenient prerequisite for rate cuts that keeps the Fed indefinitely sidelined.
Let’s trace the evolution:
- 2023–early 2024: Powell repeatedly emphasized that the Fed wouldn’t “wait for inflation to return all the way to 2%” before easing, citing the risk of overtightening given the long and variable lags of monetary policy.
- Late-2024/Early 2025: A more cautious tone emerged. Inflation was falling, but Powell now insisted on “greater confidence” that inflation was heading sustainably to target.
- Now, mid-2025: Confidence has become gospel—and not in the quantifiable, inflation-breakevens-kind-of-way. Instead, Powell is anchoring his stance in a new framework: the dual mandate loophole. That is, because employment is at or near target and inflation isn’t, no easing is justified.
In other words: the presence of full employment isn’t an opportunity to recalibrate; it’s now an excuse to stay on hold. Outrageously, he even suggested he was being generous by not raising rates preemptively on the basis of future tariff related price hikes.
The Confidence Conundrum:
This “confidence,” however, is amorphous. Is it a string of favorable CPI prints? An internal forecast? Some Fed whisper network consensus?
Worse, Powell now seems to treat confidence not as a threshold for action, but as a moving target. The June CPI print, with Core (ex-Food/Energy) rising just 0.2% month-over-month for the fifth month, was dismissed. Why? Because it wasn’t good enough to instill confidence. There’s no defined runway. No checkpoint. Just vibes.
And when a journalist had the gall to confront Powell with his own prior quote about being “data dependent,” his facial expression, caught on camera and now circulating finance Twitter, looked like a man trying to distance himself from a prior self. He didn’t repeat the phrase. He didn’t defend it. He just flinched.
That wasn’t a pivot. That was a disavowal.
Contradictions Piling Up:
Here’s what Powell has said in the past:
“We don’t need inflation to be at 2% to cut rates. We just need to be confident it’s on a path to 2%.”
— FOMC press conference, December 2023
And yet, here’s what he’s saying now:
“One of our mandates, employment, is at target. Inflation is not. So we must remain restrictive.”
This isn’t just a policy evolution—it’s a strategic contradiction. If inflation is on a path to target, and the Fed acknowledges that monetary policy acts with lags, then why continue to lean on blunt-force interest rates? By Powell’s earlier logic, the Fed should be easing into normalization, not digging in further.
Lag Time or Lag Excuses:
Powell has often invoked the “long and variable lags” of monetary policy—a phrase borrowed from Milton Friedman—to justify patience. But now, when evidence suggests current policy is already weighing on housing, investment, and real wage growth, he’s disregarding his own framework.
Is the Fed no longer worried about the risks of overtightening? About causing damage that becomes visible only in retrospect?
If “data dependency” meant anything, we’d see a conversation about the balance of risks. Instead, we’re watching the Fed use certainty in one area (employment) to ignore deterioration in others (credit, housing, forward inflation expectations).
What This Says About the Fed:
Powell’s evolving standard, now anchored in emotion rather than economics, signals a deeper issue: The Fed is increasingly risk-averse, not data-driven. And as the “confidence” goalpost drifts further into the fog, it undermines both transparency and accountability. In short: Powell isn’t waiting for better data. He’s waiting to feel good about the data. And in a system predicated on measurable outcomes, that’s a dangerous shift.
The Dissenters Vindicated?
Governors Christopher Waller and Michelle Bowman both said they wanted a quarter percentage point reduction, as they see tariffs having only a temporary impact on inflation. They said staying on hold, as the rate-setting Federal Open Market Committee has done since December, poses risks to the economy.
In separate statements, Waller and Bowman laid out their reasons for dissenting, the first time two governors have done so since 1993. The committee voted 9-2 to hold, and the differences of opinion reflect “a healthy and robust discussion,” Waller said.
“There is nothing wrong about having different views about how to interpret incoming data and using different economic arguments to predict how tariffs will impact the economy,” he wrote. “But, I believe that the wait and see approach is overly cautious, and, in my opinion, does not properly balance the risks to the outlook and could lead to policy falling behind the curve.”
Further, Waller insisted that inflation impacts from President Donald Trump’s tariffs have been “small so far” and could continue in that vein.
And just as we warned was a possibility last week, the arrival of Friday morning’s (2 days post the Powell FOMC meeting and press conference) jobs report, we find out the US labor market has slowed sharply over the past three months, particularly with the most recent downward revisions. Here’s the summary:
- U.S. nonfarm payrolls rose +73,000 month-over-month in July, BUT there were sharp downward revisions of -258,000 (!) to prior months.
- Healthcare, private education, and leisure & hospitality are the sectors holding the economy together. Cyclical sectors like manufacturing were weak.
- The unemployment rate remained unchanged at 4.2% with the labor force participation rate down to 62.2%.
- The workweek did rise slightly to 34.3 hours. Average hourly earnings were up +0.3% month-over-month (3.9% year-over-year, trending sideways).
Bottom line: With today’s revisions, the Fed does indeed look behind the curve. As Fed Governor Waller described in his statement this morning, “private-sector payroll growth is near stall speed.” The Fed should cut in September, perhaps by as much as 50 basis points, and move the policy rate out of restrictive territory soon.
Our View on Inflation
As the markets we follow continue to forecast, discount, and react to macroeconomic conditions driven by US fiscal policy, one of the key debates of 2025 is around how Trump’s tariffs will impact inflation. There’s a lot of noise out there, and depending on which “expert” you’re listening to at a given point in time, you may have developed strong views on what will come from this shift in our country’s global trade balance.
With that said, we believe having a nuanced understanding of how tariffs impact inflation is key to staying disciplined during this period of macroeconomic uncertainty. Below are a few thoughts from our team on how we view tariff-driven inflation, including why many fears around sectoral price increases are likely misunderstood and overblown.
Before we continue, here is our (brief) definition of inflation: Measured by indices such as the consumer price index (CPI) or producer price index (PPI) and expressed as a percentage, inflation is defined as the rate at which the general level of prices for goods and services rises over a period of time.
2021 Inflation vs. 2025+ Inflation
The post-pandemic inflation surge in 2021 and the tariff-driven inflation of 2025 offer two distinctly different examples in how inflation can manifest – and knowing the difference between the two (where we were and where we’re going) is, in our view, the most sensible approach to informing market views.
Inflation in 2021: Demand-Pull and Supply Shock Dynamics
In 2021, U.S. inflation reached a four-decade high, with the Consumer Price Index (CPI) peaking at approximately ~7%. The primary drivers included:
- Supply chain disruptions catalyzed by global bottlenecks in shipping, semiconductor shortages, and labor constraints on the back of the COVID-19 Pandemic.
- Fiscal Stimulus: Trillions in government spending increased disposable income and consumer demand.
- Labor Market Tightness: Wage growth accelerated as firms competed for workers in an environment where millions of Americans were ‘compensated’ by the government in the form of direct stimulus checks.
- Energy Price Volatility: Oil and gas prices rebounded sharply from pandemic lows.
In this remarkably turbulent economic period, inflation was broad-based, affecting nearly all sectors, and was persistent, with month-over-month price increases compounding over time.
Tariff-Driven Inflation in 2025: Sectoral
In contrast, the inflationary pressures in 2025 stem primarily from sectoral tariffs imposed by the U.S. government on imports from countries all over the world – with tariff rates varying country-by-country, from ranges of 5% all the way up to 60% depending on each respective trade agreement.
The team at Crest has held conversations with leading big-box retail executives in recent weeks, and we’ve heard how large American retailers are re-underwriting global imports in today’s tariff environment. Tariffs will present the following options for businesses exporting into the USA:
- Raise consumer prices according to new tariffs on products (and avoid the marginal and negative impact to their bottom lines).
- Diversify supply chains into countries with lower tariff rates (which too comes at a cost to the business).
- ‘Eat the increased costs’ to avoid losing market share in the USA
- Sell products to countries with more accommodating trade agreements (move out of the American market). P.S. this probably will not happen.
From our conversations, it is most likely that businesses will prioritize ways in which they can continue to sell into the US market with limited price increases or “eat the tariff cost”. And yes – automation and AI are massive tailwinds in neutralizing margin compression.
Why would businesses eat tariffs when they could quickly pass increased costs on to the consumer in many cases? The answer is fairly straightforward: With exception of the rare monopoly-type businesses, the American consumer is price sensitive, and businesses are likely to lose valuable market share if they raise prices too high. Businesses with smaller balance sheets and/or a dependence on one country for their supply chains will be forced to raise prices quickly in order to stay afloat.
The Key Discernment
Unlike 2021, the inflationary effect of tariffs is not compounding over time. Tariffs result in a one-time upward adjustment in prices as import costs rise. Once prices adjust to reflect the new cost structure, further inflationary pressure from tariffs will subside – as inflation is measured as a rate over time. And look at the data: After multiple months of what economic pundits call “dangerously inflationary” tariffs-in-action, June’s inflation in core goods was predictably up, but only at a rate of 0.25% year-over-year.
Referencing “Tracking the Short-Run Price Impact of US Tarriffs” study by Harvard’s Alberto Cavallo (July 28th 2025 study), the below charts measure “US Retail Price Indices” as a ratio of American retailer products’ price on a given day to the price on the last observed day – and the Harvard study measures 331,217 products over the following categories:
US Retail Price Indices: Domestic vs. Imported
Data from four large U.S. Retailers: Vertical dotted lines denote major tariff announcement events in 2025
As you can see below, price increases have been marginal (0-1% changes from prior day prices) and appear to come in one-time increases that reset to a ratio of 1 (hence the “rolling hills” retail price ratio changes on imported data).
US Retail Price Indices: By Country of Origin
Data from four large U.S. Retailers: Vertical dotted lines denote major tariff announcement events in 2025
In the below, we see price increases and decreases are variable on a country-by-country basis, underscoring the constraining nature of tariffs to the direct countries and products impacted.
While we wait to see additional corporate reactions to tariff agreements as they settle this week and next, we’ll likely see increases in the pricing that are reflected in the coming months’ inflation data. However, unlike 2020-2021, these price increases will be one-time hikes, have a non-compounding effect, and will be constrained to certain industries – and will ultimately have a limited impact to the rate of inflation over time.
Tariffs & Deficits
The US Treasury is set to see another big cash windfall after fresh tariffs were imposed on much of the globe following an August 1 deadline. Even countries that have reached new trade understandings with the United States have still had to agree to what was once considered steep tariff rates, like the 15% levies imposed on Japan and the European Union. Markets have taken a dip on this new reality, but stocks are still near record highs and have not yet displayed the panic seen in the aftermath of “Liberation Day” in April. Plans for Canada and pause for Mexico
Snapshot: Tariffs are paid to the U.S. government by importers, who look to manage the duties in several ways. That includes raising retail prices, which has sparked fears of inflation, but can also be addressed via other methods like discounts, alternative sourcing, lower profit margins, or cutting company costs. The impacts of each have been ferociously debated, but the one thing that is clear is that tariffs are raising a tremendous amount of money for Uncle Sam.
Besides filling U.S. coffers to pay down debt, Trump is seeking to utilize tariffs as a way to spark a manufacturing renaissance in which America once again becomes an industrial powerhouse. The question is whether much of that can come back to the U.S., and how long it would take.
Last month, the U.S. Treasury posted a rare $27B June budget surplus for the first time in nearly a decade. It was helped by tariff-related revenues and customs duties, which Treasury Secretary Scott Bessent expects to “be well over $300B by the end of the year.” However, the U.S. is still running a fiscal year-to-date deficit of $1.34T, meaning action will also have to be taken on the spending side of the equation in order to achieve a balanced budget.
Earnings Season Update
As we entered this past week (with roughly 40% of results in for the index), the key takeaway is that earnings are outperforming expectations, albeit on a lowered bar post liberation day. Q2 Earnings-Per-Share estimates stood at 10.2% pre-liberation day, were then subsequently revised down to 5.8%, and are now outperforming said lowered bar by posting growth of 7.7% so far. Earnings are always an expectations game, and the bar will become more difficult heading into Q3. Communications, Financials, and Real Estate are the only sectors outperforming their April 1st estimates thus far.
Turning to profit margins, we note that after a peak to trough decline of roughly 0.30% from April 1st to mid-May, margins have recovered sharply and are nearly back to the cycle highs of ~17.8%. Tariff inflation has shown up to some degree in core goods, evident in the last CPI report, but this isn’t yet reflected in corporate margin estimates. Time will tell on the durability of corporations’ ability to pass along cost throughout the supply chain or onto the consumer, but estimates today appear to be emblematic of strong pricing power and minimal margin impact from tariffs. Corporate America remains dynamic and flexible!
Economic Funnies
Crazy Stat(s) of the Week
- Here’s an example of what a roller coaster the stock market can be at times. Carvana (Nasdaq: CVNA) was down 98.99% from the 2021 highs, and after Thursday’s move this week, it’s now up nearly 10,460% from the lows! Below is a price chart of Carvana over the last five years. Not only has Carvana fully recovered its ~99% drawdown, it has also eclipsed its prior highs. Maybe you have, but we’ve never seen any recovery quite this remarkable.
- To calculate CPI inflation, the Bureau of Labor Statistics (BLS) has teams who collect approximately 90,000 price quotes every month covering 200 different item categories, and there are several hundred field collectors active across 75 urban areas. When data is not available, BLS staff typically develop estimates for approximately 10% of the cells in the CPI calculation. However, the share of data in the CPI that is estimated has increased significantly in recent months and is now above 30%, see chart below. In other words, almost a third of the prices going into the CPI at the moment are guesses based on other data collections in the CPI. Readers of these pages know we have been quite skeptical of government data and control – this latest report only adds to that sentiment, as “guesses” can be subjective based on perception or bias.
Quote of the Week
“Investing is not about beating others at their game. It’s about controlling yourself at your own game.”
– Jason Zweig
Calendar of Events to Watch for the Week of August 4th
With another week of peak earnings on deck, we will start to see a transition to mid-cap and small-cap names, but still with key large cap S&P components in the mix. Next week will be extremely light on economic data, with little in the way of market moving. With this Friday’s much weaker-than-expected payrolls report, we’re anticipating more political and monetary policy drama to drive headlines beyond the earnings data.
Monday 8/4 – June Factory Orders are expected to post a -5.0% decline, well below the prior month’s 8.2% gain.
Tuesday 8/5 – The ISM Services PMI for July is expected to come in at a solid 52.2, up from 50.8 in the prior month. We’ll also get data on the June trade balance, which is expected to show a -$68.2 billion deficit.
Wednesday 8/6 – No major US economic news due today. Looking overseas, Eurozone Retail Sales are expected to post a fairly robust 3.0% year-over-year increase, up from 1.8% last month.
Thursday 8/7 – Q2 Unit Labor Cots are expected to post a 1.1% quarter-over-quarter rate, and Q2 Productivity is expected to come in at 0.9%. The Weekly Jobless Claims data will continue to get scrutiny, particularly in light of the weaker Non-Farm payrolls report this past week.
Friday 8/8 – No major US economic news due today.
Source: MarketWatch / FactSet (August 2025)
