The Market Update with EP Wealth Advisors Managing Director, Investments -
Adam Phillips, CFA^®, CAIA, CFP^®

Often quoted in major national media, Adam is a Chartered Financial Analyst (CFA^®), a CERTIFIED FINANCIAL PLANNER™ (CFP^®), and has been included on the Forbes NextGen Best-in-State Wealth Advisors 2019 list. He is a member of the CFA Society of Los Angeles and the CFA Institute. Adam helps establish asset allocation strategy as a member of the EP Wealth Investment Committee, which supports all EP Wealth Advisors and their clients. The Committee’s top-down approach to portfolio construction begins with an outlook on the economy’s likely direction, followed by the implications for different economic sectors and asset classes. This culminates in strategic selection of the individual stocks, bonds, mutual funds or other investments deemed most appropriate for each individual client’s portfolio.

Market Update: Strong Market Rally Meets CPI Test This Week
August 11, 2025 

The Federal Reserve faces a particularly challenging environment. In recent weeks, economic data has been “noisy” and, at times, of questionable quality—most notably in the latest jobs report. Alongside this, the Fed is contending with potential threats to its independence and political pressures, adding complexity to its decision-making process. 

All eyes this week are on Tuesday’s Consumer Price Index (CPI) release. Since the jobs report, expectations for a September rate cut have risen sharply, with markets now pricing in about a 90% probability. A hotter-than-expected CPI reading, however, could complicate that outlook. If inflation proves more stubborn than anticipated, voting members of the Federal Open Market Committee may need to reconsider whether a September cut is appropriate. 

Market performance has been strong in recent months. The S&P 500 has climbed roughly 28% from its April 8 lows, marking a substantial rebound. The question now is whether there is a catalyst for further gains. Historically, August and September have been the weakest months for equities over the past three decades, which could present a seasonal headwind. 

Earnings season is also shedding light on investor sentiment. With about 90% of S&P 500 companies having reported results, 81% have beaten earnings expectations—an unusually high rate. Yet the market’s reaction has been muted. Share prices for companies that exceeded expectations have risen less than the historical average, while those missing forecasts have faced significant declines. This suggests a degree of investor fatigue, where simply beating expectations may not be enough to generate enthusiasm. 

Given the strength of the recent rally, the uncertain economic backdrop, and seasonal factors, EP Wealth’s investment team is maintaining a neutral portfolio stance. A short-term pause or pullback would not be surprising, and the team will continue to monitor economic releases, market trends, and investor sentiment closely. 

Clients with questions about how these developments could affect their financial plans are encouraged to reach out to their EP Wealth advisor. 

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Video Summary: 

Adam Phillips: [00:00:00]

Well, last week I had the pleasure of attending camp co talk. This is the annual gathering in Grand Lake Stream, Maine. It's an invite only event. It's, it's attended by well-known economists, researchers, investors. I was so lucky to be a part of it. This is most of the sessions. Most of the conversations are off the record, but we covered a lot of ground.

A lot of the things that are. Uh, that are very timely and, uh, and that we certainly find ourselves talking about here with our clients. Things like inflation, things like the health of the economy, labor markets, immigration, some really interesting conversations. One of the things that came up was, uh, the, the challenge, uh, of the Fed in today's environment where they are seeing.

Noisy data. They are also dealing with, uh, some issues around, uh, data integrity or, or just the quality of the data. We saw that with the jobs report that we received, uh, just over a week ago. They are [00:01:00] also, uh, dealing with some threats to fed independence. There's a lot of pressure coming to, uh, through from the Trump administration.

So these were all, uh, some of the, these were some of the topics that we covered. Now the Fed's job is certainly not going to get any easier. Um, sorry, can I start it over? I feel like I found my groove, but it's easier just to, it's easier just to start. Okay. Yeah, that's fine. As soon as I start talking, I'm like, oh, okay.

Now I see what I wanna say, but we'll see. Okay.

Okay. Well, I just had the pleasure of attending camp co talk. This is the annual gathering in Grand Lake Stream, Maine. It's attended by major economists, researchers, investors. It's a great opportunity for us to talk. Mostly off the record about issues that, uh, that are so timely and we really find ourselves [00:02:00] talking about with our clients here at home.

These issues include things like immigration, tariffs and inflation, the job market fed independence. There was a lot of ground that we covered. I can't share, uh, a lot of it because like I said, it was off the record, but we did have some great conversations and, and, uh, I'm so happy that I was able to attend.

One of the things that we did talk about was the challenge. Uh, for the Fed in today's environment, they are seeing noisy data. They are dealing with, uh, issues around data quality. We, we saw that with the most recent jobs report just over a week ago. They're also, uh, seeing some threats or challenges to their own independence from the Trump administration.

So the, the Fed's job is certainly not easy, uh, in today's world. It's, uh, I, I don't think I've ever, I've ever really envied. Uh, the, the job that of Chair Powell, but it is certainly not easy today. And it's not going to get any easier. This week we have [00:03:00] the inflation report. We have, uh, the consumer price index in, uh, CPI coming out tomorrow, which is Tuesday.

And what we've seen over the last several days since that jobs report is that expectations for the next rate cut have, uh, have really moved up for their next meeting, which is in September. So now we're looking at about a 90% chance of a cut at the September meeting. Now the interesting thing will be if this inflation report that comes out tomorrow, if it comes in hot, if it actually surprises to the upside and and suggests that inflation is actually hotter than most people anticipated, if that happens, and we'll know soon enough.

But if that happens, then this will. Make the lives, uh, a little bit more difficult for those voting members on the committee. Uh, that, as I said, that jobs report had increased the odds of a cut at the next meeting. But if inflation is proving more and more stubborn, that's gonna make things very difficult and it could cause them to think [00:04:00] twice.

So we'll see what that, what that inflation report is. We'll see how the market responds, but I would say that is the. Uh, the, the issue that's most top of mind this week, that's the main event that we're watching now as we look at market performance, one of the things we've talked about in recent weeks is the fact that the s and p 500 has really had a nice rebound following the April 8th lows we're up about 28% or so, off the lows.

Really strong rebound. The question is, where do we go from here? Uh, it's hard at this point to see a major catalyst, uh, for that next move, higher. We've seen quite an impressive run. We know that there is still tons of uncertainty and so we are, we remain neutral across our portfolios. We know that it's just very hard to make a short-term call, and so we try not to do it, but we do wanna acknowledge some of the risks and some of the things that we're watching.

A couple of those things are seasonality. The just the calendar is not our friend right now. We've actually seen that over the last three decades. The months of August and September are [00:05:00] actually the worst for stock returns. Now past performance is no guarantee, but it is something that we want to keep in mind.

But I'd say if we were looking at some of the data, one of the interesting things that I'd point out is the fact that we're now about 90% of the way through this most recent quarters, uh, earning season. We've seen about 81% of companies in the s and p 500 outperform expectations for earnings, uh, o over the most recent quarter.

That is extremely high. And so that is certainly nice to see. But one of the things that, uh, that many are talking about is the fact that the, the price movement in response to those earnings beat has, is actually well below what we've seen historically, and for those that actually underperformed expectations and missed, uh, on the earnings number.

Their stock is actually getting pummeled. Uh, they're getting hit quite a bit and to, to me, what this is a sign of, it's, it's a, it's a sign of potential investor fatigue. It, this is a market [00:06:00] that, uh, where it, it's just very difficult to impress investors if you're, if you're just beating earnings, that might not be enough right now.

And so that is why, at least over the short term, I think it's really important to acknowledge how far we've come. And we don't want to assume that this is a trend that will continue. A little bit of a pause. Would not surprise us here, so I'll leave it there for now. If you have any questions, please don't hesitate to reach out to your financial advisor.

I'll look forward to seeing you next week.