Software Index

State of the Market

August saw equity markets climb to new peaks, buoyed by trade relief and robust economic data. The Nasdaq surged to a record close on August 8, marking another all-time high of 2025, with AI-driven tech giants like Nvidia leading the charge. The S&P 500 came close to its own record the same day, supported by strong corporate earnings and potential signs of cooling in the energy sector.

In contrast, the Bureau of Labor Statistics surprised markets with sharp revisions to past job reports, revealing significant prior overstatements. May’s job count was slashed by 125,000 to 19,000, and June’s dropped 133,000 to just 14,000—a combined cut of 258,000 jobs.

In accordance with the job report revision, expectations for Federal Reserve rate cuts have firmed. Analysts have placed near-zero odds for a rate move in August but estimate a 94% chance of a 0.25% reduction in September, with some analysts eying a potential 0.50% cut if labor weakens further. Softening employment data, despite stable inflation, strengthens the case for a cut to head off increased recession risk.

That said, economic output has been striking a brighter note. Q2 GDP posted a strong 3.0% annualized rate, surpassing expectations and rebounding from Q1’s contraction of 0.5%, driven by resilient consumer spending and business investment. Q3 projections, as of August 7, point to a still-solid 2.5% growth, though trade uncertainties could temper this. Price pressures stayed contained, with the Consumer Price Index up 0.2% monthly and 2.7% year over year, beating forecasts. The rise stemmed mainly from higher shelter costs, as overall food prices held steady and energy declined 1.1%. The Producer Price Index jumped 0.9% month over month, pushing the annual rate to 3.3%. This surge is likely from tariff-induced supply chain issues, potentially presaging future consumer price effects.

On the trade front, the US and China extended their tariff truce by 90 days on August 12, averting a jump to more substantial duties on Chinese imports. Other reciprocal tariffs persist, with 2025 tariffs projected to raise $3.1 trillion over a decade but risking $582 billion in losses from retaliation.

On the software front, the Swedish AI coding startup Lovable achieved a notable milestone by securing a $200 million Series A funding round led by Accel, valuing the company at $1.8 billion and instantly granting it unicorn status only eight months after its public launch. This investment stands out as one of Europe’s largest early-stage deals ever, underscoring investor enthusiasm for innovative “vibe coding” platforms, which leverage AI to enable users to build software through natural language.

Overall, markets reflect cautious optimism, with GDP strength and steady inflation offering support. Yet, flawed labor data, trade uncertainties, and fiscal strains signal potential turbulence. Fed rate cuts could provide relief, but timing and impact is not a certainty. Investors should closely monitor trade negotiations, monetary policy shifts, and job indicators as they shape a potentially choppy fall landscape.