Key Takeaways
- U.S. housing starts experienced a notable decline in August, with single-family unit construction falling 7% and multifamily units dropping 11%, signaling a cooling market.
- U.S. investors are maintaining record cash piles, reflecting a cautious market sentiment and a lack of urgency to deploy funds, with money market funds reaching $7.5 trillion by mid-September.
- Geopolitical tensions are escalating as Iran suspends cooperation with the International Atomic Energy Agency (IAEA) following European moves on UN sanctions.
- Former President Trump continues to advocate for tariffs, asserting they have prevented global exploitation of the U.S., and urges Europe to cease Russian oil purchases.
- In early predictions for the 2028 presidential election market on Kalshi, JD Vance leads with 32%, followed by Gavin Newsom at 22% and Alexandria Ocasio-Cortez (AOC) at 8%.
The U.S. economy is navigating a complex landscape marked by a softening housing market, cautious investor behavior, and heightened geopolitical risks. Recent data indicates a significant pullback in housing starts, while investors are holding onto substantial cash reserves, suggesting underlying concerns about market stability. Simultaneously, international relations are strained by Iran's nuclear program developments and former President Trump's assertive trade and energy policies.
Housing Market Cools Amidst Economic Headwinds
U.S. housing starts saw a considerable drop in August, with overall activity falling 8.5% month-over-month to a seasonally adjusted annual rate of 1.307 million units. Single-family housing starts decreased by 7% to 890,000 units, marking their weakest level since July 2024. Multifamily units (5+ units) also experienced an 11% decline to 403,000 units, reaching a three-month low.
This contraction reflects persistent housing market weakness, influenced by a glut of unsold new homes, a softening labor market, and rising construction costs, some of which are attributed to tariffs. Despite some optimism among homebuilders due to easing mortgage rates and anticipated Federal Reserve rate cuts, the decline in building permits suggests that weakness in housing starts may continue.
Investors Maintain Record Cash Piles
U.S. investors are currently sitting on record amounts of cash, indicating a prevailing sense of caution rather than an eagerness to deploy funds into riskier assets. Money market funds have swelled to a record $7.5 trillion as of mid-September 2025, representing a significant pool of capital that could be unleashed into stocks, bonds, or cryptocurrencies should risk appetites return. This trend is further underscored by figures showing foreign investors increasing their holdings of U.S. Treasury securities to a record $9.16 trillion in July.
Some market analysts point to this record cash as a sign of potential for a "ferocious rally" once liquidity conditions improve and market confidence solidifies. However, a survey of fund managers also revealed that while many are bullish on equities, a record 58% view global equity markets as overvalued, suggesting a disconnect between sentiment and valuation concerns.
Geopolitical Tensions Escalate with Iran and Russia
Geopolitical developments are adding layers of uncertainty to the global economic outlook. Iran's Supreme National Security Council announced the suspension of its cooperation with the International Atomic Energy Agency (IAEA) after Britain, France, and Germany initiated a "snapback" mechanism to reimpose UN sanctions. These sanctions, which were suspended under the 2015 nuclear deal, are set to take renewed effect on September 28 unless Iran can secure a reprieve from the UN Security Council.
Meanwhile, former President Trump continues to exert pressure on international energy policy, urging European nations to cease buying oil from Russia. He has criticized existing European sanctions as "not tough enough" and indicated that the U.S. will not allow Europeans to purchase Russian oil much longer, signaling potential new U.S. economic pressure on Moscow. Trump has also reiterated his belief that tariffs have successfully prevented other countries from exploiting the U.S., a policy stance that has seen the average applied U.S. tariff rate rise significantly in 2025 and is currently facing legal challenges, with the Supreme Court scheduled to hear arguments in November 2025.
Early Glimpse at 2028 Presidential Race
Looking ahead to the 2028 presidential election, early prediction market data from Kalshi shows Vice President JD Vance leading the field with 32%. Following him are California Governor Gavin Newsom at 22% and Representative Alexandria Ocasio-Cortez (AOC) at 8%. These early indicators highlight the emerging contenders and the shifting political landscape well in advance of the next presidential cycle.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.