Economic Update 8-06-2025

Economic data included the Federal Reserve keeping interest rates steady for another meeting. On the positive side, U.S. GDP saw strong growth for the second quarter (albeit with caveats), and consumer sentiment improved. However, the employment situation report was far weaker than expected, with several downward revisions, job openings declined, and the pace of home price appreciation continued to decelerate.

Stocks fell back last week globally along with more U.S. tariff announcements and negative labor market data. Bonds fared well domestically, as rates fell, but foreign bonds were mixed as the dollar strengthened. Commodities were also mixed as oil prices rose but fell in other groups.

 U.S. stocks lost ground last week, resulting from trade news and a weak labor market report. Markets started positively on Monday with the weekend news of a US-EU trade deal, where the EU accepts tariffs of 15% but levies a 0% rate in return, as well as agreements to purchase American energy and defense supplies. Though, by Thursday evening, the President signed an executive order to raise tariffs on most trading partners, to take effect Aug. 7, which markets took poorly on Friday. Otherwise, updated tariffs included Canada (25% to 35%, on non-treaty items), South Korea (15%), India (25%), Brazil (50%), certain copper products (50%, but not on all), several other countries at 30% (such as Switzerland), while keeping a 10% baseline on everyone else. This also included a 90-day reprieve for Mexico, allowing for further analysis and negotiations. The overall tariff rate picture remains convoluted, with markets assuming twists and turns as negotiated announcements are made.

By sector, aside from a gain in utilities and flat results for communications, all others ended in the negative, led by materials and consumer discretionary, which each fell around -5% for the week. Real estate also declined several percent, despite lower interest rates. On the positive side, per FactSet, roughly two-thirds of S&P 500 firms have reported 2nd quarter earnings, with initial estimates of around 4-5% now at a blended growth rate of 10.3%, all led by communications and technology.

Foreign stocks fell back last week as well, with the U.K. and emerging markets faring slightly better than Europe and Japan. The Bank of Japan kept the policy rate at 0.50%, as did the Bank of China at 2.75%, albeit with a dovish tone. European growth of 0.1% for Q2 exceeded expectations of a negative result. In EM, Chinese stocks led the way downward, as economic data soured, in addition to continued uncertain U.S. trade policy and no finalized deal.

Bonds fared positively as flows moved away from risk, with gains in U.S. Treasuries and investment-grade corporates, while high yield and floating rate bank loans were down just slightly. Foreign bonds were mixed, depending on currency exposure, as the U.S. dollar moved higher by over a percent.

Commodities were mixed, with gains in energy offset by declines in agriculture and industrial metals. Crude oil prices rose over 3% last week to $67/barrel, due to a mix of trade concerns as well as potential sanctions against Russian and Iranian oil exports, which could cause global supply disruptions.

Period ending 8/1/2025	1 Week %	YTD %
DJIA	-2.92	3.43
S&P 500	-2.34	6.85
NASDAQ	-2.16	7.33
Russell 2000	-4.16	-2.11
MSCI-EAFE	-3.13	17.33
MSCI-EM	-2.47	15.91
Bloomberg U.S. Aggregate	0.95	4.59

U.S. Treasury Yields	3 Mo.	2 Yr.	5 Yr.	10 Yr.	30 Yr.
12/31/2024	4.37	4.25	4.38	4.58	4.78
7/25/2025	4.42	3.91	3.95	4.40	4.92
8/1/2025	4.35	3.69	3.77	4.23	4.81

Sources:  LSA Portfolio Analytics, American Association for Individual Investors (AAII), Associated Press, Barclays Capital, Bloomberg, Deutsche Bank, FactSet, Financial Times, Goldman Sachs, JPMorgan Asset Management, Kiplinger’s, Marketfield Asset Management, Minyanville, Morgan Stanley, MSCI, Morningstar, Northern Trust, Oppenheimer Funds, Payden & Rygel, PIMCO, Rafferty Capital Markets, LLC, Schroder’s, Standard & Poor’s, The Conference Board, Thomson Reuters, U.S. Bureau of Economic Analysis, U.S. Federal Reserve, Wells Capital Management, Yahoo!, Zacks Investment Research.  Index performance is shown as total return, which includes dividends, with the exception of MSCI-EM, which is quoted as price return/excluding dividends.  Performance for the MSCI-EAFE and MSCI-EM indexes is quoted in U.S. Dollar investor terms.

The information above has been obtained from sources considered reliable, but no representation is made as to its completeness, accuracy or timeliness.  All information and opinions expressed are subject to change without notice.  Information provided in this report is not intended to be, and should not be construed as, investment, legal or tax advice; and does not constitute an offer, or a solicitation of any offer, to buy or sell any security, investment or other product.