Throughout July, the S&P 500 achieved ten fresh record peaks, driven by robust earnings reports, steady economic indicators, and emerging trade agreements established before the tariff implementation date. Six straight record closings occurred during the month’s latter half, pushing the S&P 500’s year-to-date performance to 7.8%.

Nevertheless, market volatility and economic uncertainty emerged as the month concluded. The July 31 tariff rate announcement has sparked worries about increased consumer costs. Furthermore, the July employment report disclosed that labor market conditions had been significantly weaker during the previous three months than initially understood.

Given this backdrop, investors should remain balanced as markets respond to fresh trade policies and economic information. Recent months demonstrate how rapidly conditions can shift, emphasizing why maintaining a long-term outlook remains the optimal approach for reaching financial objectives.

Primary Market and Economic Factors

• July saw the S&P 500 advance 2.2%, while the Dow Jones Industrial Average increased 0.1%, and the Nasdaq climbed 3.7%. For the year, the S&P 500 has gained 7.8%, the Dow has risen 3.7%, and the Nasdaq has advanced 9.4%.
• The Bloomberg U.S. Aggregate Bond Index fell 0.3% during July. The 10-year Treasury yield increased modestly to close the month at 4.38%.
• Global equities showed mixed results with the MSCI EAFE developed markets index dropping 1.5% while the MSCI EM emerging markets index advanced 1.7%.
• Second quarter GDP expanded at a 3.0% annualized pace, primarily attributed to rebounds in business investment and import activity related to tariff impacts.
• The U.S. dollar index recovered from 96.88 at June’s end to 99.97 by July’s close. Despite this rebound, it remains substantially lower for the year.
• Bitcoin reached a record peak of $120,198 mid-month before finishing July at $116,491.
• Gold prices stayed robust but remained below recent highs, closing the month at $3,293.
• Copper hit record levels due to specific tariffs, then suffered its largest single-day decline of 22%.
• The Consumer Price Index increased 2.7% year-over-year in June, matching economist forecasts.
• July employment growth totaled just 73,000 jobs. Major downward adjustments to May and June data revealed the economy was considerably weaker than initially reported. The unemployment rate held steady at 4.2%.

Equity markets achieved fresh record levels

The second quarter reporting period that began in July continues delivering positive results, propelling markets upward. Although numerous corporations have noted tariff-related impacts, these effects haven’t been uniformly detrimental. Among the one-third of S&P 500 companies that have reported, 80% exceeded earnings-per-share expectations. The combined earnings growth rate now stands at 6.4% annually, below recent quarters but surpassing Wall Street projections.¹

Artificial intelligence optimism boosted several Magnificent 7 companies. Microsoft and Meta both delivered stronger-than-anticipated earnings while making substantial AI infrastructure investments. Consequently, Microsoft became the second company ever to achieve a market value exceeding $4 trillion, joining NVIDIA. Conversely, Tesla’s disappointing second quarter performance weighed on its share price.

Although technology stocks have experienced mixed performance in 2025, the Information Technology sector has gained over 13% year-to-date, trailing only Industrials with returns exceeding 15%. Health Care and Consumer Discretionary sectors have underperformed and remain negative.

Fixed income markets experienced a relatively quiet month, with bonds declining modestly overall. The Federal Reserve maintained rates in the 4.25% to 4.50% range for the fifth consecutive meeting, balancing tariff-induced inflation concerns against economic expansion. Notably, two Fed governors opposed this decision for the first time since 1993, favoring a quarter-point reduction. This reflects ongoing public disagreements between President Trump and Fed Chair Powell as the administration continues pressing for lower rates.

Post-meeting data revealed July hiring weakness, with only 73,000 jobs created during the month. Earlier reports received downward revisions, indicating 258,000 fewer jobs were added in May and June than originally stated. The three-month average now totals merely 35,000 new positions monthly, well below historical norms. This suggests the Fed may need to emphasize the employment aspect of its dual mandate, raising the likelihood of rate reductions potentially starting in September.

Market participants anticipate fresh trade agreements and tariff decisions

Multiple new trade agreements were announced by the White House during July, encompassing the European Union, Japan, and South Korea. Negotiations with China remain active. These agreements prevent the dire scenarios many investors anticipated in April, though numerous other nations still face potentially elevated rates as negotiation deadlines approach. On July 31, President Trump signed an executive order establishing new tariff rates for various trading partners, effective August 7 (previously scheduled for August 1), as illustrated in the accompanying chart.

According to July 23 estimates from the Yale Budget Lab, consumers confront an overall effective tariff rate of 20.2%, the highest level since 1911. Thus far, companies appear to have absorbed much of this additional expense rather than transferring it to consumers. Whether this pattern continues depends on final tariff levels and corporate adaptation strategies.

Congress enacted significant tax and cryptocurrency legislation

Bitcoin achieved new peaks in July as Congress deliberated cryptocurrency regulation legislation. The administration’s perceived support for broader cryptocurrency adoption has contributed to Bitcoin’s 2025 gains. Additionally, the signed GENIUS Act addresses stablecoins, which are typically linked to the U.S. dollar.

On July 4, President Trump enacted comprehensive tax and spending legislation making numerous Tax Cuts and Jobs Act provisions permanent, including existing tax rates and brackets. This bill enhances investor certainty by preserving the current low-tax framework, while raising questions about growing national debt sustainability.

The Congressional Budget Office projects the legislation will increase the national debt by over $3 trillion during the next decade. Although the bill included spending reductions for major programs, these were exceeded by tax revenue decreases.

Making these tax modifications permanent eliminates uncertainty that has influenced long-term financial planning, since many TCJA provisions were set to expire this year. This development could bolster business investment and consumer expenditure in the immediate term.

The bottom line? Markets established numerous records during a volatile month characterized by tariff uncertainty, new tax legislation, and earnings reports. Looking ahead to August, trade agreements and earnings will likely continue capturing investor attention.