The U.S. stock market continued its upward trajectory for the week ending September 12, 2025, driven by a growing conviction that the Federal Reserve is on the verge of cutting interest rates. This sentiment has become the market's new climate, and like the weather, it's shaping everything in its path.
The S&P 500 and the Nasdaq Composite posted gains of +1.6% and +2.05%, respectively, bringing their year-to-date returns to 12.98% and 15.20%. These gains come as momentum and pressure are mounting on the Fed to ease monetary policy, a dynamic that suggests the market is not just reacting to data but is actively discounting the future.
The catalyst for this shift was the annual revisions to non-farm payrolls data for the year prior to March 2025, which revealed a stunning downward revision of 911,000 jobs. This revelation effectively punched a hole in the "strong jobs market" narrative that had been a key pillar of the Fed's stance. As a result, traders are now pricing in a 100% chance of a quarter-point rate reduction at the upcoming FOMC meeting, with some even considering a half-point cut, according to the CME Group's FedWatch tool. Simultaneously, the bond market adjusted to this new reality. The Bloomberg US Agg Index gained +0.41% as 30-year yields fell to 4.68%, a significant decline from their peak of 5.08% in May 2025.
On the inflation front, the overall Consumer Price Index (CPI) increased by 2.9% year-over-year in August. This number suggests that while the labor market is softening, price pressures persist, particularly in essentials such as food and electricity. Tariffs, a new variable in the economic equation, are also making their presence felt, with coffee prices rising by 21%. It appears that we are in a world where the economy is both slowing and becoming more expensive, a form of "stagflation lite" that presents a unique challenge.
Meanwhile, an unexpected asset class has been thriving: gold. Gold futures rose by +1.18% to $3,686 per ounce. UBS has raised its gold price forecast to $3,800, citing geopolitical uncertainty and the weakening U.S. economy. When the world feels uncertain, people often turn to what has been a store of value for millennia.
In this current economic landscape, softening employment trends and moderating inflation are creating a favorable environment for the Federal Reserve to consider cutting interest rates. Several recent data points underscore this shift:
Initial jobless claims rose to 263,000 this week, reaching a four-year high.
The Producer Price Index (PPI) was significantly lower than anticipated, coming in at 0.1% month-over-month, with the year-over-year figure at 2.6%, which is well below the 3.3% forecast.
The Consumer Price Index (CPI) increased 0.4% month-over-month, bringing the year-over-year rate to 2.9%, which was in line with expectations.
Annual revisions from the Bureau of Labor Statistics (BLS) revealed that 911,000 fewer jobs were created in the 12-month period ending in March than previously reported.
This combination of factors contributed to a decline in the University of Michigan Consumer Sentiment Index, which dropped to 55.4 from 58.2 in August.
Finally, the AI supernova is a reality. Oracle provided a stunning glimpse into the future, indicating that its Cloud Infrastructure revenue, driven by AI, is projected to grow from an estimated $18 billion in fiscal 2026 to a breathtaking $144 billion in fiscal 2030. This is not incremental growth; it's a quantum leap that sent Oracle's stock soaring. The company's stock surged over 35% on Wednesday, before closing the week with a robust 25.5% gain. This is a clear example of the digital "flat world" thesis in action, where new technologies can create value and disrupt traditional business models at an unprecedented pace. The AI arms race is on, and companies like Oracle are positioning themselves as critical infrastructure providers in this new technological landscape.
This week, ladies and gentlemen, the entire financial world isn't just watching the Oval Office; it's holding its breath for one event and one event only: the Federal Reserve's FOMC meeting and its big interest rate decision on September 17th. You know, this week it's a bit like a big-screen movie premiere where we've all paid for our tickets, bought the popcorn, and we're just waiting for the main feature to start.
“The effects of tariffs on consumer prices are now clearly visible. We expect those effects to accumulate over coming months, with high uncertainty about timing and amounts. The question that matters for monetary policy is whether these price increases are likely to materially raise the risk of an ongoing inflation problem.”
– Fed Chair Jerome Powell, Jackson Hole Symposium -Monetary Policy and the Fed’s Framework Review, August 22, 2025
From Trade Wars to AI: Lessons for Investors
At first glance, global trade disputes and artificial intelligence (AI) might seem worlds apart. For Sowell’s Chief Investment Strategist, Dr. Jason Hsu, both are part of a larger story: the search for greater productivity and thus corporate profits through cheaper labor — whether across borders (historically to Asia, the world’s factory) or (increasingly now) through intelligent machines. In this week’s edition of Week Ahead, we share a summary of Jason’s special lecture to the UK CFA Society.
Trade Deficits Reframed
America’s long-running trade deficit with China and, more broadly, with Asia is often cast as a loss. In his talk, Jason provides a reverse perspective: deficits reflect outsourcing, not trade imbalances. US corporations shifted production to low-cost Chinese factories, reducing expenses and boosting their global competitiveness. The result is that innovative American products, like the Apple iPhone, Tesla EVs, and Nikes, are so cost-effectively produced that US products have come to dominate the world. They are simply manufactured in and shipped from China. Far from draining US wealth, this outsourcing coincided with a tenfold increase in aggregate national wealth over the past three decades, from $17T to $170T. The 30-year-long raging equity bull market is indicative of the resulting US prosperity.
The Uneven Costs of Globalization
Still, prosperity hasn’t been evenly distributed. While consumers enjoyed lower prices and firms reaped higher profits, many US workers were left behind. Those who were not outsourced saw their bonuses, vested stock shares, and other investments balloon while prices remained largely muted. The less fortunate ones generally never transitioned into the “promised” better jobs; for many, catching up is no longer possible.
This isn’t a story of unemployment. The United States has been operating in a tight labor market for a considerable time now. This is the lesser-known story of labor non-participation: well-paying jobs existed, but they required skills many workers lacked. When the US arm-twisted Taiwan and Korea to bring their advanced tech factories to the United States, those new jobs could not be filled by Americans. The well-qualified American engineers are already hired by the great American tech firms at twice the salary. Ironically, bringing manufacturing jobs back to the United States meant bringing Taiwanese and Korean engineers to the US to fill them.
We believe it’s true that with new advancements in productivity (outsourcing work to hardworking Chinese isn’t fundamentally different from replacing workers with factory robots), better jobs are created. But we also believe the unfortunate reality is that the better jobs are often elsewhere and not for you.
AI: The Next Wave of Outsourcing
AI now threatens to extend this pattern into white-collar professions. Already, junior but well-paying roles in law, accounting, and finance are being replaced by AIs. ChatGPT has quickly evolved from a precocious but unreliable four-year-old to a solid graduate student trained on literally the entire human library and internet content. While they can’t think (yet) or perform jobs that require deep, research-based expertise, these algorithms are more than capable of performing high-knowledge tasks that are ultimately repetitive. And they do it faster and cheaper, with an unflappable attitude. What globalization did to factories, we think AI could soon do to professional services.
Social Implications for Capitalism
Jason cautioned that the bigger risk isn’t technological failure but social fallout. As AI adoption accelerates, corporate productivity could soar while inequality deepens, setting the stage for new forms of political backlash — not against foreign competitors, but against machines and their owners. Perhaps it is a foot race between Skynet/Terminator and income inequality as to which will be society’s undoing.
But even in the perfect scenario where friendly robots perform most manufacturing and service work and there is more than enough to share for all. In that world of perfect abundance, what does work look like? More importantly, what does “working” mean? The old notion, so baked into our DNA and culture, that you eat what you kill. In fact, the entire notion of capitalism is based on the social model that the more you produce, the greater your right to consume… what will come of that human instinct when everything is done by highly capable robots?
Where Humans Still Win
Which jobs endure in the age of AI? Jason pointed to roles where human presence itself is valued, such as creativity whose source is human struggle rather than algorithmic calibration to popular taste, trust-based relationships, and experiences that can only be induced through human connections that can’t be replicated by machines. Where the human story matters more than output, workers retain an edge.
Those in financial advisory may have struck gold. In the future, smart algos that systematic managers employ today will further evolve to handle most of the investment activities. The research on AI has thus far concluded that machines are superior at detecting and acting on trends and patterns; they are even better at predicting investor behaviors than trained psychologists. For future advisors, outsourcing investing (to quant algos) won’t just reduce work and costs—it will meaningfully enhance returns. And, as investing becomes commoditized by smart machines, the value created from wealth management will shift more significantly from Wall Street jocks to Main Street planning and life coaching-based financial advisors.
How to Stay Ahead
Jason’s advice for professionals and investors alike: adapt early. Treat AI as a collaborator, not a rival. Those who leverage AI to amplify their skills — “playing Tony Stark with an AI assistant (Jarvis)” — will capture opportunities. Those who resist may find themselves displaced.
Putting his university professor hat on, Jason cautions students not to focus on whether they can write a better paper than ChatGPT, but to challenge themselves to write a better paper than they ever could, with the help of all available AI agents: ChatGPT, Perplexity, DeepSeek, Claude, and Grok.
Implications for Investors
The investment takeaway is twofold:
Winners will be companies that successfully harness AI, much like firms that mastered global supply chains in past decades. We are only in the third inning of the AI revolution. Better applications, better technology, and better firms have yet to be born. We will likely see history repeat itself, much like when Google overtook Yahoo, rendering it irrelevant.
Risks lie in the social and economic disruptions that follow, including labor displacement, inequality, and shifts in government policy to address these issues, which may reshape entire industries. The line that marks professional inadequacy will rise substantially for all of us.
AI is more than Tech Innovation
AI is more than a technological innovation — it represents a structural transformation as significant as globalization itself. For investors, the challenge is to recognize both the efficiencies AI enables and the broader consequences it brings for markets and society.
Disclosure: This article contains opinions that are subject to change without notice. The reader should not construe these opinions as a recommendation to invest in any security or as investment or financial advice. The securities identified and described do not represent all of the securities purchased, sold ,or recommended for client accounts. The reader should not assume that an investment in the securities identified was or will be profitable.
Advisory services offered through Sowell Management, a Registered Investment Advisor. The views expressed represent the opinion of Sowell Management. The views are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Stated information is derived from proprietary and non-proprietary sources that have not been independently verified for accuracy or completeness. While Sowell Management believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and Sowell Management’s view as of the time of these statements. Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those expressed or implied in such statements. Investing in securities involves risks, including the potential loss of principal. While equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles, or from economic or political instability in other nations. Past performance is not indicative of future results.
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WEEK AHEAD
September 15-22, 2025
The U.S. stock market continued its upward trajectory for the week ending September 12, 2025, driven by a growing conviction that the Federal Reserve is on the verge of cutting interest rates. This sentiment has become the market's new climate, and like the weather, it's shaping everything in its path.
The S&P 500 and the Nasdaq Composite posted gains of +1.6% and +2.05%, respectively, bringing their year-to-date returns to 12.98% and 15.20%. These gains come as momentum and pressure are mounting on the Fed to ease monetary policy, a dynamic that suggests the market is not just reacting to data but is actively discounting the future.
The catalyst for this shift was the annual revisions to non-farm payrolls data for the year prior to March 2025, which revealed a stunning downward revision of 911,000 jobs. This revelation effectively punched a hole in the "strong jobs market" narrative that had been a key pillar of the Fed's stance. As a result, traders are now pricing in a 100% chance of a quarter-point rate reduction at the upcoming FOMC meeting, with some even considering a half-point cut, according to the CME Group's FedWatch tool. Simultaneously, the bond market adjusted to this new reality. The Bloomberg US Agg Index gained +0.41% as 30-year yields fell to 4.68%, a significant decline from their peak of 5.08% in May 2025.
Meanwhile, an unexpected asset class has been thriving: gold. Gold futures rose by +1.18% to $3,686 per ounce. UBS has raised its gold price forecast to $3,800, citing geopolitical uncertainty and the weakening U.S. economy. When the world feels uncertain, people often turn to what has been a store of value for millennia.
In this current economic landscape, softening employment trends and moderating inflation are creating a favorable environment for the Federal Reserve to consider cutting interest rates. Several recent data points underscore this shift:
Finally, the AI supernova is a reality. Oracle provided a stunning glimpse into the future, indicating that its Cloud Infrastructure revenue, driven by AI, is projected to grow from an estimated $18 billion in fiscal 2026 to a breathtaking $144 billion in fiscal 2030. This is not incremental growth; it's a quantum leap that sent Oracle's stock soaring. The company's stock surged over 35% on Wednesday, before closing the week with a robust 25.5% gain. This is a clear example of the digital "flat world" thesis in action, where new technologies can create value and disrupt traditional business models at an unprecedented pace. The AI arms race is on, and companies like Oracle are positioning themselves as critical infrastructure providers in this new technological landscape.
This week, ladies and gentlemen, the entire financial world isn't just watching the Oval Office; it's holding its breath for one event and one event only: the Federal Reserve's FOMC meeting and its big interest rate decision on September 17th. You know, this week it's a bit like a big-screen movie premiere where we've all paid for our tickets, bought the popcorn, and we're just waiting for the main feature to start.
From Trade Wars to AI: Lessons for Investors
At first glance, global trade disputes and artificial intelligence (AI) might seem worlds apart. For Sowell’s Chief Investment Strategist, Dr. Jason Hsu, both are part of a larger story: the search for greater productivity and thus corporate profits through cheaper labor — whether across borders (historically to Asia, the world’s factory) or (increasingly now) through intelligent machines. In this week’s edition of Week Ahead, we share a summary of Jason’s special lecture to the UK CFA Society.
Trade Deficits Reframed
America’s long-running trade deficit with China and, more broadly, with Asia is often cast as a loss. In his talk, Jason provides a reverse perspective: deficits reflect outsourcing, not trade imbalances. US corporations shifted production to low-cost Chinese factories, reducing expenses and boosting their global competitiveness. The result is that innovative American products, like the Apple iPhone, Tesla EVs, and Nikes, are so cost-effectively produced that US products have come to dominate the world. They are simply manufactured in and shipped from China. Far from draining US wealth, this outsourcing coincided with a tenfold increase in aggregate national wealth over the past three decades, from $17T to $170T. The 30-year-long raging equity bull market is indicative of the resulting US prosperity.
The Uneven Costs of Globalization
Still, prosperity hasn’t been evenly distributed. While consumers enjoyed lower prices and firms reaped higher profits, many US workers were left behind. Those who were not outsourced saw their bonuses, vested stock shares, and other investments balloon while prices remained largely muted. The less fortunate ones generally never transitioned into the “promised” better jobs; for many, catching up is no longer possible.
This isn’t a story of unemployment. The United States has been operating in a tight labor market for a considerable time now. This is the lesser-known story of labor non-participation: well-paying jobs existed, but they required skills many workers lacked. When the US arm-twisted Taiwan and Korea to bring their advanced tech factories to the United States, those new jobs could not be filled by Americans. The well-qualified American engineers are already hired by the great American tech firms at twice the salary. Ironically, bringing manufacturing jobs back to the United States meant bringing Taiwanese and Korean engineers to the US to fill them.
We believe it’s true that with new advancements in productivity (outsourcing work to hardworking Chinese isn’t fundamentally different from replacing workers with factory robots), better jobs are created. But we also believe the unfortunate reality is that the better jobs are often elsewhere and not for you.
AI: The Next Wave of Outsourcing
AI now threatens to extend this pattern into white-collar professions. Already, junior but well-paying roles in law, accounting, and finance are being replaced by AIs. ChatGPT has quickly evolved from a precocious but unreliable four-year-old to a solid graduate student trained on literally the entire human library and internet content. While they can’t think (yet) or perform jobs that require deep, research-based expertise, these algorithms are more than capable of performing high-knowledge tasks that are ultimately repetitive. And they do it faster and cheaper, with an unflappable attitude. What globalization did to factories, we think AI could soon do to professional services.
Social Implications for Capitalism
Jason cautioned that the bigger risk isn’t technological failure but social fallout. As AI adoption accelerates, corporate productivity could soar while inequality deepens, setting the stage for new forms of political backlash — not against foreign competitors, but against machines and their owners. Perhaps it is a foot race between Skynet/Terminator and income inequality as to which will be society’s undoing.
But even in the perfect scenario where friendly robots perform most manufacturing and service work and there is more than enough to share for all. In that world of perfect abundance, what does work look like? More importantly, what does “working” mean? The old notion, so baked into our DNA and culture, that you eat what you kill. In fact, the entire notion of capitalism is based on the social model that the more you produce, the greater your right to consume… what will come of that human instinct when everything is done by highly capable robots?
Where Humans Still Win
Which jobs endure in the age of AI? Jason pointed to roles where human presence itself is valued, such as creativity whose source is human struggle rather than algorithmic calibration to popular taste, trust-based relationships, and experiences that can only be induced through human connections that can’t be replicated by machines. Where the human story matters more than output, workers retain an edge.
Those in financial advisory may have struck gold. In the future, smart algos that systematic managers employ today will further evolve to handle most of the investment activities. The research on AI has thus far concluded that machines are superior at detecting and acting on trends and patterns; they are even better at predicting investor behaviors than trained psychologists. For future advisors, outsourcing investing (to quant algos) won’t just reduce work and costs—it will meaningfully enhance returns. And, as investing becomes commoditized by smart machines, the value created from wealth management will shift more significantly from Wall Street jocks to Main Street planning and life coaching-based financial advisors.
How to Stay Ahead
Jason’s advice for professionals and investors alike: adapt early. Treat AI as a collaborator, not a rival. Those who leverage AI to amplify their skills — “playing Tony Stark with an AI assistant (Jarvis)” — will capture opportunities. Those who resist may find themselves displaced.
Putting his university professor hat on, Jason cautions students not to focus on whether they can write a better paper than ChatGPT, but to challenge themselves to write a better paper than they ever could, with the help of all available AI agents: ChatGPT, Perplexity, DeepSeek, Claude, and Grok.
Implications for Investors
The investment takeaway is twofold:
AI is more than Tech Innovation
AI is more than a technological innovation — it represents a structural transformation as significant as globalization itself. For investors, the challenge is to recognize both the efficiencies AI enables and the broader consequences it brings for markets and society.
Disclosure: This article contains opinions that are subject to change without notice. The reader should not construe these opinions as a recommendation to invest in any security or as investment or financial advice. The securities identified and described do not represent all of the securities purchased, sold ,or recommended for client accounts. The reader should not assume that an investment in the securities identified was or will be profitable.
Advisory services offered through Sowell Management, a Registered Investment Advisor. The views expressed represent the opinion of Sowell Management. The views are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Stated information is derived from proprietary and non-proprietary sources that have not been independently verified for accuracy or completeness. While Sowell Management believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and Sowell Management’s view as of the time of these statements. Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those expressed or implied in such statements. Investing in securities involves risks, including the potential loss of principal. While equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles, or from economic or political instability in other nations. Past performance is not indicative of future results.