Insights 
VT 
In August, the US ISM manufacturing index recorded a reading of 48.7, below the anticipated 49.0, though up from July’s 48.0. Key metrics showed prices paid at 63.7, slightly below the expected 65.3 and previous 64.8, with employment at 43.8, compared to the expected 44.5 and prior 43.4.
New orders increased to 51.4 from a previous 47.1, whereas imports fell to 46.0 from 47.6. Production declined to 47.8, down from the previous figure of 51.4. Economic factors such as tariffs are influencing various sectors, leading to rising costs in some areas like organic cane sugar due to tariff implications.
Industry Challenges and Opportunities
Challenges in several industries were noted, with construction experiencing low activity levels affecting new sales, and trucking and transportation showing substantial decline. Despite broad concerns, the rise in new orders suggests some areas of recovery, contributing to dip buying activity within U.S. stock markets.
The latest ISM data presents a conflicting picture for us. While the headline number shows manufacturing is still contracting at 48.7, the jump in new orders to 51.4 suggests a potential bottom is forming. This push-and-pull creates uncertainty, which we expect will keep volatility elevated in the coming weeks.
This report complicates the Federal Reserve’s path ahead of their September meeting. With the latest CPI reading from July 2025 still sticky at 3.5% and August’s non-farm payrolls showing job growth slowing to just 150,000, the Fed is caught between fighting inflation and managing a weakening economy. We saw similar periods of data confusion back in late 2023, which led to sharp, two-way market action.
Investment Strategies and Economic Indicators
Given this backdrop, we are looking at options strategies that benefit from indecision. The VIX, which has been hovering around 19, seems undervalued given the risk, making long volatility positions attractive ahead of the next inflation print. The report’s weakness in trucking and transport also supports bearish positions on transportation ETFs, which have already fallen over 8% since July 2025.
Protective puts on broader indices like the S&P 500 remain a prudent hedge against the risk that weak production and employment signal a deeper slowdown. The dip buying noted in the market may be short-lived if follow-through data does not confirm the strength in new orders. We must also watch the 2-year Treasury yield, as its reaction will signal the market’s conviction on future Fed policy.
