How Low Can Stocks & Crypto Go? August 25th, 2025
A future Fed rate cut is now in focus
Bottom Line: My first rule of money... Never let your money and emotions cross paths. This story is a weekly wake-up call to show you the near-worst-case scenario for stocks and crypto. Why? So, you can plan your financial future with a cool head, not a racing pulse. The odds of a near-worst case outcome almost certainly won’t happen, however if your plan accounts for it – it can help you manage through even the most trying markets like what we’ve experienced this year.
The US stock market is history’s ultimate wealth-building beast. Crypto? It’s minted millionaires from early believers. Fact: Over 90% of the time, investors who try to “time” the market end up poorer than if they just stuck to their original investments. This is about dodging that trap.
Here’s how the big three indexes are faring in 2025 so far:
- DOW: +8% (+2% last week)
- S&P 500: +10% (flat to higher last week)
- Nasdaq: +11% (-1% last week)
A furious Friday rally spawned by the Fed quickly changed the conversation from the potential for a technology-led correction into one of optimism and gains for most companies by the end of the week – this included a record high for the DOW at week’s end as well. This comment from Federal Reserve Chairman Jerome Powell is what did it: the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance. That’s fed speak for – we'll probably cut interest rates in September. 75% of traders now expect a Federal Reserve rate cut in September.
Speaking of the Federal Reserve, another dynamic to watch is the developments surrounding Biden-appointed Fed Governor Lisa Cook who is under investigation for mortgage fraud. President Trump had indicated he might fire her if she doesn’t resign amid the public disclosure of her case which clearly demonstrates that she applied for mortgages in multiple states at the same time stating each would be her primary residence. Her potential replacement could spur additional expectations for a lowering of mortgage rates if that comes to fruition.
This week features a slew of new economic data that will show insight into the health of the economy including durable goods orders, a revision to the second quarter GDP, new and pending home sales and the Personal Consumption Index (an inflation metric). Over the next week geopolitical news could also factor into the equation. Any indication of peace between Russia and Ukraine would provide an additional positive catalyst for the markets. It’s likely to be another headline driven week.
As for cryptos...
Here’s a look at where they stand.
- Bitcoin: -4% last week +21% YTD
- Ether: +7% last week +42% YTD
- BitwiseETF (Top 10 cryptos): +1%, last week +25% YTD
I can’t value cryptos because 1they have no inherent value. Stocks, though? They’ve got bones. Let’s break down the S&P 500:
- Current P/E: 29.97
- Historic Avg. P/E: 16.16
Translation: On earnings alone, the maximum downside risk is a 46% drop from here—flat with last week as stock prices and fundamentals moved in tandem. The market is still somewhat historically expensive; we have seen a 2% improvement in the fundamental value of the market during this market cycle.
So, What’s Your Move?
If a 46% dip wouldn’t derail your life, you’re probably golden. If it would? Time to call a pro and build a plan that doesn’t leave you sweating bullets—or making mistakes.