Market Returns July 2025

S&P 500: +2.2%  

S&P 500 Equal-Weight: +1.0%  

Dow Jones:  +0.2%  

Nasdaq: +3.7%  

MSCI EAFE: -1.4%  

MSCI Emerging Markets: +2.0%  

Bonds (US Aggregate): -0.3%  

 Economic & Policy Highlights  

Interest Rates & Fed Outlook  

• The Federal Reserve kept rates unchanged at 4.25 – 4.50%  
• Two members dissented, voting in favor of cutting rates 
• Markets continue to price in two rate cuts by year-end as early signs of labor market weakness emerge.  
• Buttressing rate cut hopes is the worry over the inflation picture 
• Oddly, services have been pressuring inflation higher, not goods, US Treasury yields inched higher while credit spreads tightened slightly 

Trade & Tariffs  

• President Trump announced trade deals with Japan and the European Union to lower broad-based tariffs  
• The impact of tariffs on US companies has varied widely; some face notable cost pressures others see impact. 
• The massive inventory restocking in the first quarter could be part of the delayed impact from tariffs 

Employment & Growth  

• July added 73,000 new jobs missing expectations 
•  Prior months were revised down by 258,000 jobs, one of the largest two-month revisions since the 1970’s.  
• Second-quarter US GDP came in at a 3% annualized rate helped by an uptick in consumer spending and reduction in imports  
• Global growth was stable, with the eurozone avoiding a technical recession and China showing signs of bottoming out after significant stimulus efforts.  

Consumer spending & sentiment  

• Sentiment surveys have been weak, though hard data has been more balanced 
• Consumer spending has become more targeted with sectors like airline travel rebounding, while notable retailers experienced drops in foot traffic and sales    

Geopolitical Volatility & Energy  

• The price of oil was stable through much of July but rallied in the final week, up 6.4% for the month  
• The spike was driven by renewed threats from the White House to stem the sale of Russian oil 
• Diesel prices rose 20 cents/gallon due to tight global supplies  
• President Trump also gave President Putin a new timeline for a peace deal with Ukraine.  

Summary Impact  

• Major indexes reached new highs in late July   during a busy earning season 
• Q2 earnings were generally better than expected, but expectations had been lowered in the run up to earnings season 
• Investor attention remains centred on margins, cost escalation due to tariffs, forward guidance, and AI-related capital expenditures  
• Performance of individual stocks varied with outsized gains for beating across the board and punishing losses for missing on a single business metric  

Commentary:  

Markets moved incrementally higher through the month of July, buoyed by limited evidence of tariff impacts, continued elevated AI spending and the hope of lower short-term interest rates.  While volatility appears to be contained in the overall market, below the surface individual company stock prices are experiencing exaggerated moves both up and down.  Signs to us of heightened speculation and retail investor fever.  Many large institutional investment firms have chosen to stay on the sidelines in the past few months, wary of what has been characterized as “A Slow-Motion Melt-Up” by a famous strategist (Ed Yardeni) 

Investors today need to be reminded that technology, media and telecom (TMT), the S&P 500 longtime dominant sector, reached new highs in July in terms of valuations.  More importantly concentration risk is fast approaching the dot-com bubble peak in 2000, with stock correlations within TMT rising as well.  

Economic releases continue to paint a mixed picture, with investors cheering on weak data in the hopes that this will expedite rate cuts from the FED. This potential change in policy is believed to ensure a soft landing or no landing at all.   With earnings out of the way, all eyes and ears will be on the FED. This is a binary outcome ripe for disappointment, thus we continue to exercise caution given stretched valuations.