What inflation, interest rates, jobs, and earnings tell us about markets today
At Wealth Analytics, our role is to help you navigate changing markets with clarity and confidence. To do that, we stay focused on the key indicators that drive long-term economic trends. Jeff Poole, one of our principal advisors, has always emphasized four core metrics that provide a clear lens into the health of both the U.S. economy and financial markets: Inflation, Interest Rates, Jobs/Unemployment, and Corporate Earnings.
These four areas are especially important now, as we continue through a period of transition – where policy, global events, and market cycles intersect with new opportunities and challenges.
Table of Contents
Inflation
Inflation impacts every household and business. Whether it’s grocery bills, rent, or raw materials, rising prices affect how far our money goes. Inflation that runs too hot reduces purchasing power, while inflation that cools too quickly can signal weakness. Jeff tracks not just the headline numbers, but also underlying components – like wages, housing, and energy – because they reveal how sticky price changes may be and how they’ll influence the Federal Reserve’s decisions.
The Federal Reserve has targeted a 2% inflation rate since 2012. As of August 31, 2025, the inflation rate is 2.92%. The Fed remains cautious, acknowledging inflation may stay above its target into 2027.
Jeff often compares inflation to losing weight. The first few pounds come off quickly with focus and discipline, but the last few are harder to shed – sometimes requiring more patience and expertise, and sometimes simply being accepted as part of the bigger picture.
We view a non-concerning range for inflation to be between 2% and 3%. For investors, this means the Fed will likely continue balancing patience with vigilance, which in turn influences both bond and stock markets.
Interest Rates
Interest rates are the economy’s price tag for borrowing. When they rise, mortgages, car loans, and business financing all become more expensive. When they fall, borrowing becomes cheaper and markets often respond with optimism.
Today, savers are benefiting from higher rates, with cash and money market funds earning between 3.5% and the mid-4% range. The 10-year Treasury yield is currently around 4% – down from peaks near 5% in late 2023, but still offering attractive income for investors. On the other hand, higher mortgage rates have cooled the housing market and made homeownership less affordable, especially for first-time buyers.
The Federal Reserve is expected to begin lowering rates this calendar year, with the first cut widely anticipated at its September meeting. Additional cuts may follow before year-end, depending on economic data. For investors, this means portfolios may need adjustments as bond and cash allocations respond to a shifting rate environment.
Jobs & Unemployment
The labor market is a powerful signal of economic strength. Low unemployment supports consumer spending, which drives two-thirds of U.S. economic activity. But a job market that’s “too hot” can fuel inflation, while rising unemployment may point to slowing growth.
Jeff pays attention to hiring trends, wage growth, and labor force participation to assess where the economy sits in the cycle. His view: if people have jobs and can provide for their families, society can better handle other challenges.
Job growth has slowed. In August, just 22,000 jobs were added, well below economists’ expectations of 76,500. Recent data suggests new labor market entrants – such as high school and college graduates – accounted for 85% of the increase in unemployment from mid-2023 to mid-2025. Some companies cite artificial intelligence (AI) as a factor in layoffs or slower hiring, while others highlight AI’s role in creating new jobs and skill demands. Broader uncertainty in the economy and politics may also be contributing to a “wait and see” hiring stance.
On September 5th, the U.S. Bureau of Labor Statistics reported unemployment at 4.3% for August, up from 4.2% in July. This is still low by historical standards but signals some cooling. If unemployment trends closer to 5% or beyond, Jeff would consider making greater portfolio shifts. For clients, this reinforces the importance of flexibility in investment strategies.
Corporate Earnings
Ultimately, stock prices reflect the ability of companies to generate profits. Strong corporate earnings can push markets higher, while disappointing results often lead to volatility.
Jeff looks closely at not just quarterly results, but also forward-looking guidance – what companies say about demand, costs, and confidence. This helps us assess whether markets are pricing in realistic expectations.
Some investors are asking whether worries about inflation and tariffs have caused analysts to slash profit forecasts for S&P 500 companies this quarter. The answer may surprise you: they haven’t. In fact, through July and August, analysts actually nudged earnings-per-share (EPS) estimates slightly higher for the third quarter – an encouraging sign that expectations remain resilient despite the headlines. For investors, this suggests markets may still have underlying strength.
Historical Averages
It’s easy to think today’s numbers are “too high” or “too low,” but history helps provide perspective. Here are the long-term averages for some of the most-watched economic measures:
- Money Market Rates: ~4–5%, though they swing widely with Fed policy.
- 30-Year Mortgage Rates: Historically closer to 7–8%, even though the last decade accustomed us to much lower levels.
- Inflation: About 3% over the long run, generally considered “healthy.”
- 10-Year Treasury Yields: Typically hover in the 4–5% range, serving as a benchmark for lending.
Why is this important? Because many of today’s figures – though they may feel high or low compared with the unusual conditions of the past 15 years – are much closer to historical norms.
Why These Metrics Matter for You
By focusing on these four areas, we can cut through the noise and stay grounded in what truly drives markets and portfolios. While headlines may shift daily, these indicators provide a steady foundation for financial planning.
Jeff and the team translate these big-picture metrics into personalized strategies – so your financial plan remains resilient, no matter where the economy heads next.
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