Fixed Income & Equities Markets Week in Review

This was a busy week for equity investors. There was much data and information to digest and ponder. Trade negotiations were a major focus, ahead of President Trump’s August 1st deadline to lock in trade deals. The week got started with news that an agreement was reached with the European Union (EU), featuring a better-than-feared 15% tariff rate on EU goods, $750 billion in purchases of US energy, $600 billion in US investments, and purchases of “vast amounts” of military equipment. Negotiations resumed with China but were wrapped up after two days, with an agreement to extend discussions but no major breakthroughs announced. Another 90-day tariff deadline extension is anticipated. Throughout the rest of the week, there were a number of tariff-related announcements: 1) a 25% tariff on India goods, with additional penalties if the country continues to purchase Russian oil; 2) an additional 40% tariff on Brazil goods, bringing its total to 50%; 3) a universal 50% tariff on copper imports as of August 1st (although excluding refined products); 4) a 15% tariff rate for South Korean based goods, and a pledge by South Korea for $350 billion in investments and $100 billion in US energy purchases; 5) a 90-day extension for Mexico, due to related work on US border dynamics (though Mexico to continue paying the 25% fentanyl tariff; 6) a list from the White House on tariff rates for several countries that have yet to reach trade deals; 7) in increase on Canada fentanyl tariffs to 35% from 25%; 8) a 20% tariff for Taiwan goods; and 9) a rate of 19% for Thailand, Malaysia and Cambodia goods. This week’s deal cadence initially eased fears of another wave of tariff hikes, but on Friday (the August 1st extension deadline) President Trump imposed fresh tariffs on a number of countries that have not negotiated deals. This news was a partial driver of the sell-off in the major domestic indices on Friday: Dow Jones Industrial Average -1.3%, S&P 500 -1.6%, Nasdaq Composite -2.2%, and Russell 2000 -2.4% (as of 2:30 PM EDT).

Another major focal point was the Federal Reserve’s (Fed) latest Federal Open Market Committee (FOMC) meeting. On Wednesday, the central bank left the federal funds rate unchanged at 4.25%-4.50%. However Fed Governors Waller and Bowman dissented, preferring a 25 basis point rate cut at this meeting. There was a notable shift in language, with the opening sentence stating “economic activity moderated in the first half of the year.” This was a downgrade from the prior “economic activity has continued to expand at a solid pace.” During his press conference, Chair Powell noted evidence of the beginning of tariff inflation, and reiterated that the Fed has not made any decision regarding a possible September rate cut (and awaiting inflation and labor data between now and the next meeting), with inflation still somewhat above-target and the labor market solid. Powell’s somewhat hawkish comments dampened hopes for a sooner-than-later rate cut and stocks moved modestly lower on the news.

Economic data was also on investor’s radar screens. This week’s economic calendar was busy, with a mix of data and results. The most important releases were: 1) the first reading of 2nd quarter GDP, which came in at 3.0%, beating the2.0% estimate, better than -0.5% in the 1st quarter, and the highest since 3rd quarter 2024; 2) June’s core Personal Consumption Expenditures (PCE) index (the Fed’s favored inflation measure), which increased 0.3% month/month, was in-line with consensus, but was above May’s 0.2% increase. On an annualized basis, core PCE increased 2.8%, slightly ahead of the 2.7% consensus but in-line with May’s 2.8%; and 3) July non farm payrolls, which showed that the nation added a weaker-than-expected 73,000 jobs during July (and well below expectations for 110,000). The prior two months were also revised down sharply, by 258,000, suggesting that the labor market has been slowing over the past three months. This was not music to the equity market’s ears, particularly after the Fed’s decision not to lower rates this week (and which gave Waller and Bowman a messaging platform about why they dissented…and by the way, they are on Trump’s short list for replacing Chair Powell as Fed chair). Concern rose that the Fed should have cut rates this week and that it may be getting behind the curve on easing. This disappointing news was additional fuel to the market’s Friday sell-off, and was additive to the tariff announcements from President Trump.

Finally, 2nd quarter earnings season moved into high gear this week, with 164 of the S&P 500 companies reporting results. Thus far, some of the takeaways and notable themes have been: 1) a fairly resilient US macro backdrop; 2) expected larger tariff headwinds in the 2nd half, especially for consumer-facing companies; 3) some successful internal tariff mitigation measures; 4) further increases in artificial intelligence (AI) capital spending; 5) improving AI monetization & productivity; 6) earnings & free cash flow tailwinds from accelerated depreciation in the reconciliation bill; 7) broadening profit margins; 8) a pickup in corporate merger & acquisition activity; 9) a flip in foreign exchange from a headwind to a tailwind; and 10) lingering pricing power. Big tech was also in the spotlight, with better-than-expected results from Meta Platforms (META) and Microsoft (MSFT), both further underpinning the AI secular growth theme, as well as accelerating cloud migration and strong ad revenue & pricing increases. AI appears to be providing a benefit to both engagement and ads. Also of note, company CEO’s have started to openly talk up workforce reductions to Wall Street, highlighting smaller workforces as a strategic advantage. This dovetails with the disappointing July non farm payroll data discussed above. Earnings season will remain busy next week, as 122 of the S&P 500 companies report their results.

As of July 31, 2025