Trading Insights 8/25/25

Mike Larson
August 25, 2025

Chart of the Day 📈 8/25/25: Here's a Post-Powell Trend You Can Bank On!

Mike Larson | Editor-in-Chief

We often see wild trading action on BIG news days. Sometimes, we’ll get huge moves after the headlines hit – but they fail to stick for a single session, much less a week, a month, or a quarter. But I have one “Post-Powell” trend I think you can bank on!

Here’s the MoneyShow Chart of the Day. It shows the 2-year/10-year Treasury yield spread going back five years. As the name suggests, this is the difference between the yield on the 2-year Treasury Note and the yield on the 10-year Treasury Note. A positive number means the latter is higher than the former, while a negative number means the opposite is true.

2/10 Treasury Yield Spread

Data by YCharts

You can see that after a lengthy stint in negative territory, the 2/10 spread grew to 0.54%, or 54 basis points, as of last Thursday. That’s what you typically see when economic worries subside. It’s also what happens when bond markets grow more concerned about future inflation risk.

That second point is key. Last Friday, Federal Reserve Chairman Jay Powell gave an incredibly important speech in Jackson Hole, Wyoming. He essentially confirmed that the Fed will cut rates at its meeting that ends Sept. 17.

But what happened? Short-term yields fell much more than long-term yields. The 2-year yield dropped 10 basis points…while the 10-year yield fell only 7 bps. Even further out on the curve, the yield on the 30-year Treasury Bond dipped just 4 bps.

I’ve been analyzing the bond market and Fed policymaking closely for a quarter-century. The message here is simple. Bond investors are pricing in the risk that more easy money NOW will fuel greater inflation risk LATER. The political pressure being brought to bear on the Fed is amplifying those concerns.

In short, I think the “steepening yield curve” trend is here to stay. You can trade it using interest rate futures and futures options, if that’s your thing. Or…you could just buy bank stocks!

As a general rule, banks benefit from a steeper curve because they borrow short and lend long. The greater the spread between short-term and long-term yields, the fatter their profit margins from core lending operations.

The Financial Select Sector SPDR Fund (XLF) was up 2.1% in the month leading up to Powell Day, while the SPDR S&P Bank ETF (KBE) was up 3.8%. The Technology Select Sector SPDR Fund (XLK)? Up just 0.4%. Then on Friday, the KBE rose 4%, more than double the daily gain on the XLK.

That outperformance might just be a trend you can…BANK on.

Lee & Lloyd: Top Tech, Dividend, and Global ETF Trades for the Rest of 2025

Looking for fresh trades to power your portfolio into year end? Then don’t miss this stock picking panel I hosted with Michael Lee, founder of Michael Lee Strategy, and Luke Lloyd, founder and CEO of Lloyd Financial Group! Both experts joined me at our MoneyShow Virtual Expo last week to share their best tech, dividend, and global fund picks.

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