Below are the economic and market highlights for the week:
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Consumers felt the leading edge from higher tariffs in August. The CPI Index rose 0.40% from the previous month, bringing the annual inflation rate to 2.90%. That was its highest reading since January but still roughly in line with expectations. Core CPI, which excludes volatile food and energy, rose 0.30% for the month and was higher by 3.10% YOY. Inflation was broad-based with apparel and cars up 0.50% and 0.30%, respectively. Food prices were also stung by tariffs, higher by 0.50%. Despite the U.S. being a longtime powerhouse in agriculture, the country has in recent years shifted to being a net food importer in certain categories that have been hit by tariffs. Unfortunately for consumers, inflation is forecasted to further accelerate over the next 12 months as levies are now being fully priced into goods and services.
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The latest labor market releases showed signs of further weakening in the jobs market. Weekly jobless claims rose 27K from the prior week, bringing the weekly total to 263K. That was their highest level since October 2021 and above the 231K that observers had expected. The unemployment claims release followed a BLS jobs revision which showed 911K fewer jobs added to the economy through March, marking one of the biggest revisions on record.
- Considering high inflation and a tough jobs market, it is no surprise consumers are feeling a lot worse about the state of the economy. The index measuring consumer sentiment fell to 55.4 this month from 58.2 in August. September’s reading represents a 21% decline from the year ago period and is not far from the historical low of 50 recorded back in June 2022. In addition to inflation and the labor market, tariffs also remain a concern for consumers. During interviews for the survey, about 60% of consumers provided unprompted comments about tariffs.
Markets Trade Higher on Rate Cut Expectations
All three major indices scored new, all-time highs once again this week as signs of a weakening labor market increased expectations that the Federal Reserve will put aside their inflation concerns in order to support the economy with rate cuts. The combination of this week’s higher jobless claims and last week’s BLS revisions paint a picture of a weakening – but not yet weak – labor market, with the unemployment rate continuing to hold at a reasonably low 4.3%. Still, the downward inflection is likely to be enough to spur the Fed to cut at their meeting next week even in light of the fact that this week’s consumer inflation reading ticked higher. The Fed is likely to prioritize jobs over inflation concerns both because of the rate of change in the labor market appears to be accelerating and because recent inflation readings are being skewed by tariffs that are essentially one-time price increases that are simply taking time to work their way through the supply-chain. It is worth noting that Friday’s Michigan Survey of U.S. Consumers declined to its lowest levels since this past May – which coincided with the first full measurement period following Trump’s tariff announcements in April when consumers were also in the dumps. Friday’s survey showed that consumer are growing cautious, citing concerns over potential job losses, as well as their expectations that inflation will rise 3.9% annually over the next five years. Given that consumers control over 70% of the economy, perception can become reality, which further highlights the predicament the Fed is facing when it comes to the timing and magnitude of rate cuts when it meets on Tuesday and Wednesday. Should the Fed decide not to cut, they risk the consumer drying up. On the other hand, if they cut 150 bps over the next fifteen months as the market now believes that could unleash a significant consumer spending wave as consumers put aside their current handwringing over jobs and inflation. Rate cut expectations are already being fully priced into the bond market, and mortgage and housing activity has responded accordingly. You’d expect additional, pent-up, financing-based spending to follow as companies and individuals will likely jump to refinance and free up cash flow. For that reason, we’d expect the Fed to proceed cautiously when they meet next week. Until then, we’d expect markets to trade subdued until Wednesday at 2 PM EST when the Fed announces its policy decision and provide their future rate projections (“dot plot” or Summary of Economic Projections). Powell’s comments will be closely parsed as he provides more color on the factors influencing the Fed’s decision.
The Week Ahead
All eyes will be on the Federal Reserve as it holds its September FOMC meeting. We’ll also check in on the consumer as retail sales and housing data are released.
Year End Giving Under the One Big Beautiful Bill Act, Q&A with Tyler Ozanne, CFP®
In our July 25, 2025 Week in Review, we outlined several key provisions of the One Big Beautiful Bill Act that was signed into law this past March. Because the legislation introduces major changes to charitable giving beginning in 2026—and with year-end deadlines approaching for those hoping to maximize deductions—we’re taking a closer look. In the Q&A below, advisor Tyler Ozanne, CFP® breaks down what the new rules mean and how to maximize deductions before the rules change.
How does the OBBBA affect charitable giving?
The bill introduces two new limitations on the tax benefits of charitable giving. While donors in higher tax brackets previously received deductions at their full marginal rate (e.g., 37%), the new law caps the benefit at 35%. Additionally, contributions must exceed 0.5% of AGI before deductions begin.
What does the 35% cap mean?
Under prior rules, a taxpayer in the 37% bracket could deduct charitable contributions at that full rate. For every $1 given, their taxes decreased by $0.37. Under the OBBBA, starting in 2026 the deduction benefit is capped at 35%. This means that for every $1 given, the tax savings will be limited to $0.35—even if the donor is in a higher bracket.
What is the 0.5% Adjusted Gross Income (AGI) floor?
Under the current rules, a taxpayer may deduct charitable contributions regardless of income levels up to statutory limits (60% AGI for cash gifts and 30% for appreciated property). Under the OBBBA (starting in 2026), donations must surpass a 0.5% floor of your AGI before any donations become deductible. That means if your AGI is $100,000, the first $500 of donations does not count.
What advice are you giving to clients who are charitably inclined?
The cap and floor reduce the tax savings for high-income donors. For very large gifts, the reduction grows significantly, creating a strong incentive to accelerate charitable giving before 2026.
What are the key takeaways?
• The OBBBA caps charitable deduction benefits at 35% beginning in 2026.
• Donors in the 37% bracket lose part of the deduction benefit.
• Additionally, the OBBBA sets a floor of 0.5% AGI for charitable deductions regardless of income level.
• 2025 is the final year to maximize the full charitable donation benefits