Why the Stock Market Is Rising Even as the U.S. Economy Slows
- Jeff Schlotterbeck, CFP®
- 3 days ago
- 3 min read
Posted August 15, 2025
If you’ve been following recent economic headlines, you might be wondering: Why is the stock market rising in a slowing economy?
It sounds counterintuitive — but that’s exactly what’s happening right now.
Look around: fewer “Help Wanted” signs, quieter restaurants, friends delaying big purchases. You’re not imagining it. The slowdown is showing up in the data:
73,000 jobs added in July — well below expectations [BLS]
258,000 jobs erased from prior months after revisions [BLS]
4.2% unemployment — the highest in two years [BLS]
1.97 million continuing jobless claims — the most since late 2021 [Department of Labor]
Weak factory data pointing to manufacturing cutbacks [ISM]
And yet, the S&P 500 is up more than 8% year-to-date and continues to set records.
Why the Stock Market Is Rising in a Slowing Economy: 3 Key Drivers
1.) Lower Interest Rates Could Be Coming
Recent weak economic data has investors betting the Federal Reserve will cut interest rates later this year [Reuters].
Lower rates:
Make borrowing cheaper for businesses and consumers
Encourage investment in growth initiatives
Reduce bond yields, which can push more money into stocks
Think of it like a seesaw: when interest rates fall, stocks often become more attractive than bonds, tipping the balance toward equities.
2.) The “Magnificent 7” Are Powering the Rally
Apple, Microsoft, Amazon, Alphabet, Nvidia, Meta, and Tesla — known as the “Magnificent 7” — have fueled much of this year’s market growth.
Analysts expect their Q2 earnings to grow 14.1% year-over-year, compared to 3.4% for the other 493 companies in the S&P 500 [FactSet].
Because these companies make up such a large share of the index, their gains can lift overall market performance — even if most companies are struggling.
3.) Money and Momentum Are Still Flowing In
Years of stimulus and government spending have left substantial cash in the system. That liquidity, combined with investor optimism and “buy the dip” habits, can fuel rapid rallies.
Think of it like a campfire: when the wood (liquidity) is stacked and ready, it only takes a small spark to ignite a blaze.
The Bottom Line: Markets and the Economy Don’t Always Move Together
The current rally is being driven by rate cut expectations, concentrated gains among tech giants, and strong investor sentiment not just today’s economic numbers.
That’s why chasing headlines is risky, and why having a long-term investment plan matters more than ever.
Let’s Make Sure Your Portfolio Is Ready
If you’re wondering how today’s environment fits with your investment strategy, let’s talk. I’ll review your allocation and make sure it’s aligned with your goals not just the market’s mood.
Sources:
Risk Disclosure: Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance does not guarantee future results. This material is for information purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. The content is developed from sources believed to be providing accurate information; no warranty, expressed or implied, is made regarding accuracy, adequacy, completeness, legality, reliability, or usefulness of any information. Consult your financial professional before making any investment decision. For illustrative use only.
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