Insights 
VT 
US construction spending in July 2025 saw a decrease of 0.1%. This aligns with prior market expectations.
This new data follows a previous decline of 0.4%.
Sector Cooling Confirmed
The July 2025 construction spending data met our expectations, confirming a slight cooling in the sector. Since the market was not surprised, our focus now shifts to the broader economic trend this data reinforces. We see this not as a shock, but as another piece of evidence suggesting a slowing economic pace.
This continued weakness in construction, combined with the August 2025 inflation report showing core CPI still hovering around 3.3%, puts the Federal Reserve in a difficult position. The upcoming FOMC meeting later this month is now critical for setting near-term rate expectations. We believe the Fed will remain data-dependent, creating uncertainty that can be traded.
Given this uncertainty, we are considering protective strategies on broad market indices. Buying put options on the S&P 500 or the Nasdaq 100 offers a hedge against a potential economic downturn. With the VIX, a measure of market volatility, having remained relatively low near 14 through late August 2025, purchasing these options is comparatively inexpensive.
Market Reaction to Economic Slowdown
We are also looking closely at the housing sector, which is directly impacted by this trend. Looking back, we saw 30-year mortgage rates holding above 7% through August 2025, and the National Association of Realtors reported a dip in July’s existing home sales. This suggests continued pressure on homebuilder stocks, making bearish positions on ETFs like XHB an attractive strategy.
The slowdown also points to softening demand for industrial commodities. We anticipate that prices for materials like copper and lumber may face headwinds in the coming weeks. We are exploring short positions in copper futures, especially as its price has struggled to hold above $4.50 per pound recently.
