Market Snapshot
By the Numbers
- The S&P 500 gained 2.2% in July, the Dow Jones Industrial Average was up 0.1%, and the Nasdaq rose 3.7%. Year-to-date, the S&P 500 is up 7.8%, the Dow is up 3.7%, and the Nasdaq is up 9.4%.
- The Bloomberg U.S. Aggregate Bond Index declined 0.3% in July. The 10-year Treasury yield rose slightly to end the month at 4.38%.
- International stocks were mixed with the MSCI EAFE index of developed markets declining 1.5% and the MSCI EM index of emerging markets gaining 1.7%.
- GDP grew at an annualized rate of 3.0% in the second quarter, due largely to a reversal in business investment and import activity due to tariffs.
- The U.S. dollar index rebounded somewhat from 96.88 at the end of June to 99.97 at the end of July. It is still down significantly this year.
- The Consumer Price Index rose 2.7% on a year-over-year basis in June, in line with economist expectations.
- The economy added only 73,000 jobs in July. Significant downward revisions to the May and June figures mean that the economy was weaker than originally reported. The unemployment rate remained low at 4.2%.
Market Strength & Job Uncertainty
The S&P 500 notched ten new all-time highs in July, fueled by strong corporate earnings, resilient economic data, and new trade deals ahead of the tariff deadline. This included six consecutive record closes in the second half of the month, all of which contributed to year-to-date gains of 7.8% for the S&P 500.
However, market and economic uncertainty resurfaced at the end of the month. The July 31 announcement of new tariff rates has raised concerns over rising prices for consumers. Additionally, the July jobs report revealed that the labor market has been weaker over the past three months than previously believed.
The second quarter earnings season that kicked off in July continues to show positive surprises, driving markets higher. While many companies have reported some impact from tariffs, the effects have not been consistently negative. With over a third of S&P 500 companies reporting, 80% had positive earnings-per-share surprises.
Enthusiasm for artificial intelligence supported several Magnificent 7 stocks. Both Microsoft and Meta reported better-than-expected earnings amid major investments in AI infrastructure. In response, Microsoft joined NVIDIA as the second company in history with a market capitalization of over $4 trillion.
While tech stocks have had an uneven ride so far in 2025, the Information Technology sector is up over 13% on the year, second only to Industrials which has returned over 15% so far in 2025. Meanwhile, Health Care and Consumer Discretionary stocks have lagged and are in the red.
In the bond market, it was a relatively muted month, with bonds falling slightly in aggregate. The Fed held rates steady within a range of 4.25% to 4.50% for the fifth meeting in a row as it balanced inflation concerns due to tariffs with economic growth.
New data after the meeting showed that hiring weakened in July, with 73,000 jobs added during the month. Previous reports were revised downward, meaning there were 258,000 fewer jobs added in May and June than originally reported. The three-month average is now only 35,000 new jobs per month, far below the historic average. This suggests that the Fed may have to shift some of its focus to the employment side of its mandate, increasing the possibility of rate cuts, potentially beginning in September.
The government passed major tax legislation
On July 4, President Trump signed a comprehensive tax and spending bill that made many provisions from the Tax Cuts and Jobs Act permanent, including current tax rates and brackets. The bill provides more certainty to investors by maintaining the current low tax environment, but also raises concerns about the sustainability of the growing national debt.
The Congressional Budget Office estimates the bill will add over $3 trillion to the national debt over the next decade. While there were spending cuts to major programs in the bill, they were more than offset by reductions to tax revenue.
The permanent nature of many of these tax changes removes uncertainty that has affected long-term financial planning, since many provisions from the TCJA were scheduled to expire this year. This could help support business investment and consumer spending in the near term.
Tariff Update
The White House announced several new trade deals throughout July, including with the European Union, Japan, and South Korea. Trade negotiations with China are ongoing. These deals avoid the worst-case scenario that many investors feared in April, but many other countries are still facing potentially higher rates as the deadline to negotiate expires. On July 31, President Trump issued an executive order with new tariff rates for many trading partners set to go into effect on August 7 (the previous tariff deadline was August 1).
Chart of the Month: Tariff Rates
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The market indices discussed are unmanaged. Investors cannot directly invest in unmanaged indices.
The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The market index is unmanaged.
The NASDAQ Composite Index is an unmanaged, market-weighted index of all over the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System.
The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
Data sources: Clearnomics, YCharts, The Wall Street Journal, Charles Schwab Asset Management, The Economist, Committee for a Responsible Federal Budget, JPMorgan, US Treasury Department, & US Federal Reserve.