Summary
In August 2025, the Trump tax cuts have fueled a powerful rotation into cyclical sectors, small caps, and banks, while long-term yields remain a headwind for high-multiple tech. GAR Capital’s macro desk highlights key market developments, sector positioning, and trading opportunities — with a focus on staying nimble in rate-sensitive names and rotating ahead of the crowd.
Market Movers
- 📈 US PPI PRODUCER PRICE INDEX: Aug 14, 2025
- 📈 US RETAIL SALES: Aug 15, 2025
- 📈 US CONSUMER SENTIMENT: Aug 15, 2025
📚 Deep Dive 📚
GAR Capital August 2025 Market Update: Trump Tax Cuts Drive Rotation, Yields Cap Tech Gains
📊 Market Snapshot — August 11, 2025
- S&P 500: 6,392 → +2.8% MTD as post-tax cut optimism lifts cyclicals.
- Russell 2000: 2,671 → +4.9% MTD, outperforming as small caps benefit from lower effective tax rates.
- Financials (XLF): +5.2% MTD; banks rally on stronger loan growth and tax savings.
- Industrials (XLI): +3.8% MTD; order books filling on capex incentives.
- Tech (XLK): +0.9% MTD; gains capped as 10-year yield holds near 3.76%.
- USD Index (DXY): 98.15 → Weakening trend, boosting export-heavy sectors.
🏛️ The Big Picture — One Month In
The Trump tax cuts have delivered exactly what we anticipated: a front-loaded boost to corporate sentiment and consumer spending. Markets, however, are now digesting second-order effects — rising deficit projections and stubbornly elevated yields.
Key Macro Developments:
✅ Corporate earnings revisions ticking higher for Q4.
✅ Consumer confidence index hits 12-month high.
⚠️ CBO deficit projection revised +$275B for FY2025.
⚠️ Treasury supply increasing, keeping upward pressure on long-term yields.
🚀 Investor Implications — August Adjustments
Leading Sectors:
🏦 Financials → Regional and large-cap banks benefiting from lower tax drag and stable NIM outlook.
🏗 Industrials → Infrastructure and full expensing policy creating multi-quarter demand tailwinds.
Lagging Sectors:
📉 Utilities & Staples → Outflows as capital rotates toward growth and cyclicals.
📉 High-Multiple Tech → Selective buying only; yields above 3.75% keep valuations under scrutiny.
⚡ Trader Implications — Current Market Playbook
Volatility Pockets: Intraday ranges remain wide in small caps and energy — ideal for momentum scalps.
Rate Sensitivity: Stay nimble in high-beta tech; use earnings beats as catalysts but fade overextended rallies if yields climb.
Rotation Awareness: Monitor sector breadth daily — leadership is broadening beyond mega-cap tech, supporting index stability.
Active Watchlist:
Long: XLF, IWM, XLI, XLE
Tactical Growth: UPST, SOFI, QBTS (only on breakout confirmations)
Avoid for Now: XLU, XLP, extended cloud/software names
📌 Final Take — August Lens
The tax cuts have reinforced a pro-growth backdrop, but the rally isn’t without friction. Higher yields are capping tech multiples, while cyclicals, small caps, and financials lead the charge. This remains a rotation-driven market — traders who adapt to sector flows will outperform those clinging to last year’s leaders.
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📍 GAR Capital Macro Desk
“Act early. Rotate before the herd.”