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The July labor report showed a weak pickup of just 73,000 jobs on the month. Furthermore, some 258,000 jobs in recent months were revised away. The unemployment rate edged up to 4.2%, from 4.1% the month before. US equities sold off broadly on the news. Earlier in the week, the Federal Reserve kept rates steady, with Fed Chair Powell delivering somewhat hawkish commentary in the press conference after the meeting. US gross domestic product in the second quarter grew at a 3% annual rate, beating expectations. With the arrival of his August 1 deadline, President Trump announced new tariff rates on a number of countries.

This week we’ll be looking at factory orders on Monday; the US trade deficit, S&P final US services PMI, and ISM services on Tuesday; and US productivity, initial jobless claims, wholesale inventories, and consumer credit on Thursday. Our strategists and portfolio managers cover the latest geopolitical, market and economic trends in our Insights section.

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Aug 4, 2025

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The hostilities in the Middle East brought uncertainty that frightened investors until a ceasefire decreased tensions there. Gold closed the month marginally higher. Oil prices spiked during the Iran crisis and ended the month a bit higher. President Trump suspended trade talks with Canada after the country enacted a digital-services tax, subsequently withdrawn. Japan’s economy shrank in the first quarter. America’s NATO allies pledged to increase spending on defense. For its part, Japan said it would target defense spending at 2% of GDP versus a prior target of 1%.

The US Congress debated the budget bill in June, and certain officials of the Federal Reserve began to speak in favor of rate cuts. Bond prices rose, with the yield on the 10-year falling 18 basis points over the month of June. Mortgage rates declined as well, albeit more slowly. The US dollar index continued to slide. Inflation ticked higher, with core PCE, the Fed’s preferred inflation measure, rising to 2.7%.

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The FTSE 100 was flat on the month and the Euro Stoxx 50 declined, while the Nikkei, the Shanghai Composite and the MSCI ACWI ex USA all rose.

US equities climbed to new highs at the end of June as the market rebounded from the tariff selloff. Investor anxiety about the hostilities in the Middle East decreased as Israel and Iran observed a ceasefire. Within the S&P 500, only Information Technology and Communication Services outperformed the index, while Consumer Staples, Real Estate and Utilities underperformed the most.

International Equity

US investment grade bonds performed positively as measured by the Bloomberg US Aggregate Bond Index, which rose 1.5% to a positive 4.02% YTD. High yield bonds also rallied with the Bloomberg US High Yield 2% Issuer Cap Index up 1.8%, as high yield spreads continued to tighten over June. The US 10-year Treasury yield ended the month 18 basis points lower at 4.22%.

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July 2025

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The general theme of the Federal Reserve (the Fed) Chair Jerome Powell’s remarks at the post June Federal Open Market Committee (FOMC) meeting press conference was to focus on what is important. He repeatedly declined to comment on political noise, implications of his impending term expiration and speculation of what future actions might be. Instead, he reiterated the Committee’s commitment to serving the American people and seeking a stable economy with maximum employment and stable prices. In that vein, the Fed kept the target range of the federal funds rate at 4.25-4.50%. In the updated Summary of Economic Projections, the members still anticipate 0.50% worth of cuts by the end of the year. Powell continued to defend the “wait and see” approach since the possibility of rising oil prices and the lingering questions surrounding the timing, degree, and impact of tariffs continue to drive uncertainty.

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The Bloomberg Aggregate Global Total Return Bond Index improved in June to return 7.27% YTD as its US component improved during the month. Emerging markets continued to perform strongly. The US dollar was again down for the month, posting its worst first half to a year since 1973.

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Jobs report disappoints

The Trump administration set stiff new tariffs on Canada, Brazil and other countries. The European Union is among the trading partners that are soon expected to receive a letter from Trump regarding tariffs. In Canada, the unemployment rate declined unexpectedly to 6.9% despite the trade headwinds the country faces. The UK economy shrank in May for the second month in a row. Major US banks get set to report second-quarter results as earnings season gets underway.

This week we’ll be looking at the consumer price index and the Empire State manufacturing survey on Tuesday; the producer price index, industrial production, capacity utilization and the Federal Reserve’s Beige Book on Wednesday; retail sales, import prices, the Philadelphia Fed’s manufacturing survey, initial jobless claims, homebuilder confidence, and business inventories on Thursday; and housing starts, building permits, and consumer sentiment on Friday. Our strategists and portfolio managers cover the latest geopolitical, market and economic trends in our Insights section.