August saw a significant rotation in leadership as rest of world equities outperformed the S&P 500, small caps outpaced large cap stocks, and value bested growth names. AI driven Technology stocks, responsible for much of the US equity market gains since April, were up fractionally during the month, but significantly lagged other sectors. Meanwhile, healthcare was the strongest sector during the month, but remains down year-to-date. Dollar weakness contributed to robust non-US equity gains. Brazil was an unusual standout among emerging markets with a gain of more than 11% for the month. Since 1958, September is the only month where the S&P 500 averages negative returns. However, with rate cuts likely on the horizon and historically strong Q4 seasonality around the corner, investors appear to be holding tight for now.
U.S. interest rates declined during the month after the July jobs report missed expectations. While the July numbers were soft, it was the downward revisions to the prior two months that caused investors to wonder if the economy is approaching an inflection point. Federal Reserve Chair Powell acknowledged the weak employment picture and seemed to open the door for a rate cut at the upcoming September meeting of the FOMC. But with Q3 GDP still trending strong and lingering concerns regarding inflation, a cut is still far from certain. Meanwhile, other major economies, including Germany and Japan, saw rates rise during the month. The increased rate differential partly explains the US Dollar’s weakness in the month. Gold neared a new all-time high, while oil traded down -7%.
The following table contains a summary of August and year-to-date market performance:
| Index | August | YTD | Index | August | YTD |
|---|---|---|---|---|---|
| S&P 500 (Total Return) | +2.03% | +10.79% | MSCI All Country World (Net) | +2.47% | +14.30% |
| MSCI EAFE (Net) | +4.26% | +22.79% | Bloomberg Barclays US Agg | +1.20% | +4.99% |
| MSCI Emerging Markets (Net) | +1.28% | +19.02% | 60/40 Blend* | +1.97% | +10.71% |
* 60% All Country World Index / 40% Bloomberg Barclays US Aggregate Bond Index
As investors gather in New York City later this month for Climate Week NYC 2025, they will be assessing how the Trump Administration’s sweeping policy shifts are reshaping market dynamics and influencing the future of climate-oriented investments.
In 2022, the Biden Administration signed the Inflation Reduction Act (IRA) into law. This landmark legislation provided a framework and substantial incentives for clean energy development that unlocked billions in private capital and positioned the U.S. at the forefront of the clean energy transition. During the 2024 election, then-candidate Trump actively campaigned against certain IRA provisions related to the promotion and adoption of clean energy. Following his inauguration, President Trump signed the One Big Beautiful Bill Act into law in July 2025, which repealed or altered significant provisions of the IRA and introduced new challenges for investors focused on the clean energy sector.
Importantly, the bill dramatically accelerated the phase-out of generous clean energy tax credits, including those for wind, solar, electric vehicles, and residential energy efficiency. This change threatens to make previously attractive projects uneconomic and is likely to lead to slower near-term investment and deployment of clean energy. Trump’s “Liberation Day” tariff announcements and heightened scrutiny of Chinese-linked components are creating additional headwinds, as batteries and solar technologies are primarily imported.
That said, the impact of the Act is not entirely negative. Sectors such as geothermal, nuclear, and carbon capture were largely spared from cuts – and in some cases saw increases in their programs. Grid modernization remains a priority for the current administration, highlighting the need for reliable energy infrastructure across all energy types. Additionally, the bill allows for 100% immediate expensing of capital investments as well as research and development, a provision that could significantly boost future domestic clean energy manufacturing capacity.
While the bill advantages fossil fuels and trims some IRA incentives, it does not derail the global transition to clean and renewable energy. In fact, Pitchbook’s Q2 2025 Clean Energy VC Trends report indicates that there is a growing demand for reliable, low-carbon baseload energy. This is primarily due to the rise in AI and data centers, which will require energy from all sources—including renewables. The continued transition of using electricity instead of fossil fuels to power industrial activities, such as manufacturing and transportation, is also accelerating the demand for clean energy alternatives.
Counterintuitively, the bill’s policies provide a sense of relief to the clean energy sector. Given Trump’s campaign promises of repealing the IRA, it became a matter of which policies would be cut and to what extent. This created a sense of fear and uncertainty, which drove valuations lower – even among companies with strong business fundamentals. However, now that the OBBB has passed, there is greater regulatory clarity. Even if certain outcomes are less than they hoped for, renewable energy developers and investors are equipped to adjust their strategies and continue deploying capital efficiently.
It is also important to note that despite recent headwinds, seasoned professional investors continue to demonstrate strong interest and engagement in the sector. One example is General Atlantic’s BeyondNetZero Fund II – a $4 billion fund boasting more than 40 years of growth equity investing experience. The Fund targets profitable, late-stage companies driving progress in decarbonization, energy efficiency, emissions management, and resource conservation. The strategy is anchored in durable investment themes, such as rising energy demand from AI and data centers and the global shift toward decarbonization – trends expected to persist despite recent policy changes. With deep expertise in climate and technology, General Atlantic’s dedicated team is well-positioned to identify companies capable of delivering both strong financial returns and meaningful environmental impact. The regulatory landscape will continue to evolve, but one thing is clear: investors who remain selective, adaptable, and committed to long-term value creation are well-positioned to generate strong returns. This principle is central to much of our guidance to clients. At Caprock, we are committed to identifying opportunities that generate market-rate returns, whether through impact-focused fund managers or more conventional investment opportunities across a full range of asset classes.
What we’re reading:
Below we share a glimpse into the books currently capturing the interest of the Caprock team. These selections offer a look at the diverse tastes and curiosity that drive our team.
Tim Simon, a client advisor who works out of the Caprock New Jersey Office, is currently reading the following books:
Black Flags, Blue Waters: A great read about pirate history over the 1600s – 1700s (the golden age of piracy). It’s a vivid picture of early waters in America set against the backdrop of the Age of Exploration.
The Bad Guys Won: A story about a group of misfits who won the World Series in 1986. This is one of the best baseball books ever written. The 1986 Mets were far from perfect individuals but created an almost perfect baseball team. A very fun read that focuses on a motley crew.
This communication is not an offer or solicitation with respect to the purchase or sale of any security and is for informational purposes only. Information contained herein has been derived from sources believed to be reliable, but Caprock makes no representations as to its accuracy or completeness. Investment in securities involves the risk of loss. Past performance is no guarantee of future returns.