LCI Monthly – What Shaped August 2025
Economy & Politics
Trump’s Power Struggle Puts Fed Independence at Risk In a closely watched speech, Federal Reserve Chair Jerome Powell signaled openness to a looser interest rate policy as early as September. Yet the U.S. president continues to keep up the pressure, pushing one Fed governor to resign and escalating his power struggle with the central bank.
Trump now seeks to dismiss Governor Lisa Cook immediately, arguing that there are grounds for her removal. But such a move risks triggering a lengthy legal battle and adding fresh uncertainty to the future of U.S. monetary policy. At the same time, the president wants to appoint his controversial adviser Stephen Miran as a Fed governor. Miran, who currently leads Trump’s team of economic advisers, has already influenced him with radical proposals. He has suggested deliberately weakening the dollar—by forcing foreign creditors to buy 50- or 100-year government bonds with minimal interest, or by imposing a fee on them for holding U.S. debt.
Meanwhile, the Fed is contending not only with political interference but also with the economic backdrop. Inflation has begun to rise again, while the labor market shows mounting signs of weakness. This leaves policymakers in a difficult bind: higher inflation typically demands tighter monetary policy and higher rates, but the cooling job market instead argues for rate cuts to shore up growth.
Donald Trump fires the head of the statistics office after weak labor market data
The U.S. president had promised Americans a “golden age.” But the latest figures show the labor market has cooled. Because Trump disliked the data, he dismissed the head of the responsible agency. The consequence: in the future, investors and business leaders will only know the data is accurate when it’s bad.
Donald Trump publicly demanded that Goldman Sachs fire its chief economist, Jan Hatzius, over a tariff forecast he disliked. Hatzius’s team had warned that U.S. consumers could soon bear up to two-thirds of tariff costs, contradicting Trump’s claims that foreigners were paying instead. Trump lashed out on Truth Social, urging CEO David Solomon to replace his economist. Goldman Sachs, however, stood by its analysis and reaffirmed confidence in the forecast.
Intel partially nationalized: Donald Trump continues to actively pursue industrial policy. The level of state intervention is increasing. Other semiconductor manufacturers such as Nvidia and AMD are now also required to hand over 15 percent of their revenues earned in China to the U.S. government. The sale of U.S. Steel to Japan’s Nippon Steel was only approved because the U.S. received a “golden share”: in effect, a veto right against unwanted corporate decisions. In addition, it is reported that the U.S. plans to become the largest shareholder in the mining company MP Materials, in order to ramp up production of rare-earth magnets. Increasingly, a centrally planned mix of socialism and capitalism is emerging—shaped by the arbitrariness of the U.S. president.
Putin Emerges as the Sole Winner of the Alaska Summit During his visit to the U.S., Russia’s president appeared satisfied, even enthusiastic. And he had every reason to be: Putin can continue the war unhindered, has no need to fear sanctions for the time being, and even receives applause from the leader of the United States. The outcome underscores how isolated America’s allies feel after the talks. For Putin, the meeting was less about compromise than about legitimization on the world stage.
In France political instability intensified as Prime Minister François Bayrou announced a confidence vote scheduled for September 8 over controversial budget cuts—a move widely expected to topple the government, rattling markets
Trump’s new tariffs are here. Switzerland is being penalized. On August 7, Trump’s deadline for new tariffs expired. Switzerland’s negotiations with the United States have so far failed, while other countries have reached agreements – here’s the global overview.
US Tariffs August 2025
Markets
Fixed Income
Eurozone
10-year government bond yields remained broadly stable in August. The German Bund hovered around 2.7%, while French and broader euro area 10-year yields moved only modestly, despite political and fiscal noise. Most of the upward pressure was concentrated in longer maturities, leaving the 10-year segment relatively steady through the month.
USA
10 year treasury yields treaded lower to mixed in August. Credit spreads — the premium investors demand over Treasuries for corporate bonds — remained very tight, near levels last seen in 1998. This reflects strong demand for investment-grade corporates amid limited supply and subdued recession fears.
Equity
Global Overview
Global equities advanced in August, with the MSCI World Index rising 2.6%, supported by expectations of monetary easing in the U.S. and resilient corporate earnings.
Europe
Eurozone equities rose just 0.4% in August, but performance varied sharply across countries. Germany (-1.0%) underperformed as economic sentiment deteriorated, with weak industrial data and a trade deal with the U.S. weighing on key sectors such as autos and chemicals. France (-0.8%) also struggled, as political turmoil and the risk of government collapse undermined confidence and widened bond spreads. In contrast, Italy (+3.1%) and Spain (+4.4%) delivered strong gains, supported by relative political stability and improving domestic sentiment that drew investors toward southern European markets. Switzerland (+2.8%) also advanced, benefiting from its defensive positioning and the strength of the Swiss franc. The divergence highlights how local political and economic dynamics drove significant dispersion within the Eurozone equity market in August.
North America
North American equities posted solid gains in August, with the USA up 2.0% and Canada jumping 4.8%. In the U.S., optimism over potential Fed rate cuts supported valuations, with communication services, materials, and health care leading performance, while technology was more mixed despite Nvidia’s strong results and expanded buyback. Canadian equities outperformed, driven by energy and materials strength as well as stable financials, benefiting from resilient commodity prices and supportive macro conditions. Overall, the region showed broad-based strength, with Canada leading and U.S. gains underpinned by sector rotation beyond technology.
Asia-Pacific
Asian equities delivered mixed results in August. Japan (+4.3%) and China (+3.8%) led gains, supported by improving economic signals and policy support, while Australia (+2.0%) also advanced on resource strength. In contrast, India (-1.5%) and South Korea (-1.6%) declined amid profit-taking and growth concerns, and Indonesia finished the month broadly flat. The dispersion highlighted diverging domestic drivers across the region.
Latin America
Latin American equities advanced strongly in August, led by Brazil (+7.1%), where robust commodity prices and renewed optimism around fiscal reforms fueled gains. Mexico (+2.2%) also posted a positive month, supported by resilient domestic demand and ongoing nearshoring momentum. The region continued to benefit from global investor interest in emerging markets with solid fundamentals and exposure to commodities.
in local currency
Global Sectors in USD
