August 4, 2025

“In this business if you’re good, you’re right six times out of ten. You’re never going to be right nine times out of ten.”

Fidelity legend: Peter Lynch

Finally got our sell off, but first here are the numbers. The S&P 500 lost 2.4%, the Dow Jones Industrial average fell 2.9%, and the Nasdaq surrendered 2.2%. Internationally, the FTSE 100, the only winner, up slightly .018% and the MSCI-EAFE dropped 3.8%. The 2-year Treasury paid 3.685% and the 10-Year yield was 4.206%.

U.S. equities continued their winning streak in July, up for the third month in a row. The S&P 500® closed the month at a new all-time high, up 8.6% YTD. Just 4 out of 17 of our reported factor indices outperformed the U.S. bellwether in July. High Beta was the best performing of our reported indices, up 5.5%, while Pure Value lagged, down 1.8%. July marked the fourth month in a row when High Beta rose to the top; over 60% of its constituents outperformed the 500™ in July, vs. just 42% for the S&P 500. What does that mean? July was a good month risk was rewarded and set us up for the pullback we saw last week. Truist Co-Chief Investment Officer Keith Lerner notes that the fact that stocks had risen some 28% from their April lows meant they were priced high on hopes for rising earnings and a resilient economy. That left them vulnerable to any bad news like the president’s latest about-face, which came at an already treacherous time of year. “Historically, markets average three 5%+ pullbacks per year, and we haven’t had one since April,” he notes. “A pullback or consolidation of gains here would be normal, not unusual.” In fact, it’s like déjà vu all over again for investors who remember the market sold off last year following a weak July jobs report. History seemed to be repeating itself last week.

Market Watch reported that investors had plenty to parse last Friday, including a disappointing July jobs report, President Trump’s latest tariffs and earnings results from Amazon and Apple. The Dow fell a fifth straight day, booking its longest losing streak of the year. The U.S., July’s jobs report sharply disappointed with just 73,000 payrolls added and significant downward revisions to previous months, boosting expectations for a Fed rate cut in September. Although layoffs remain relatively subdued, rising jobless claims and longer unemployment durations are early signs of labor market softening. Productivity is forecast to rebound in Q2, but cost pressures are easing, suggesting mixed signals for the economy’s underlying momentum.

President Trump’s deadline for dozens of countries to offer their best trade deal has arrived. Yesterday, he signed an executive order raising tariffs on scores of nations, giving them a week to finalize deals. Meanwhile, there’s an irony in Detroit: The automaker most reliant on U.S. manufacturing is among the hardest hit by tariffs.

Emma Tucker, of The Wall Street Journal writes “Trump’s trade order would significantly raise tariffs on virtually every U.S. trading partner. Separately, Trump raised tariffs on Canada from 25% to 35%.

Major tech companies’ $400 billion AI spending spree is helping power big increases in their profits, pushing some of their share prices to records. Trump’s assertion of emergency powers to impose worldwide tariffs faced its toughest legal test, when a federal appeals court voiced skepticism of his move. Young men moved dramatically toward Trump in November. Ask them how he’s doing now, and they say it’s complicated.

Speaking of the jobs report, President Trump on Friday fired the head of the government agency that produces the monthly jobs report, claiming she was cooking the books for pollical reasons, Trump has also attacked Federal Reserve Chair Jerome Powell for months because of the central bank’s decision not to cut interest rates this year. He has also accused Powell of aiding Democrats at his expense. President all the usual suspects had a fit, but like everything else the press has reported to besmirch the economic policies, we will see if the President was justified. Also, The Federal Reserve has announced that Fed Governor Adriana Kugler is resigning early from her term and will exit the central bank on Aug. 8, creating a vacancy on the central bank’s 12-member interest rate setting committee that President Donald Trump will have an opportunity to fill. The President has been at odds with FED Chair Jerome Powell and would like nothing more to get the same news about him, however he had made it clear he has no intention of not letting Powell finish his term ending next year. President Donald Trump on Friday called for the Federal Reserve’s board of governors to usurp the power of Fed Chair Jerome Powell, criticizing the head of the U.S. central bank for not cutting short-term interest rates

International markets had a better week than the US so going ahead here is what we expect in the week ahead.  Global economics focuses on central bank policy decisions, trade developments, and key labor and inflation data. In Asia, the Reserve Bank of India is expected to hold its benchmark rate at 5.50% after cutting aggressively earlier this year, citing falling inflation and slowing industrial output. Australia’s household spending and trade figures may push the Reserve Bank of Australia closer to another rate cut, while New Zealand’s labor market report is expected to show a slight drop in employment and a modest rise in the unemployment rate. In Europe, recent EU-US trade developments have introduced more questions than clarity, with new U.S. tariffs weighing on sentiment—especially in Germany’s auto sector. Upcoming industrial production and trade data from Germany, France, and Italy will help gauge the depth of the impact. Meanwhile, Eurozone retail sales are expected to rebound modestly, offering limited relief.

So going forward, with consumer confidence booming unexpectedly, creating a strong positive scenario for retail stocks in the coming months, and the macro backdrop (sorry for the inside baseball speak) aligns to create double-digit upside with very little downside risk. Wall Street is buying, and analysts are boosting ratings for many stocks, especially after mostly strong earnings reports and guidance.

Finally, some good consumer news, a group of countries that are part of the OPEC+ alliance of oil-exporting countries has agreed to boost oil production, a move some believe could lower oil and gasoline prices, citing a steady global economic outlook and low oil inventories.

Mike