Your Monthly Market Newsletter, JULY 2025

July is here, and U.S. stocks have shown strong gains capping off a solid month and an excellent second quarter for Wall Street. The Dow closed higher by 276 points, or 0.63%. The broader S&P 500 rose 0.52% and the tech-heavy Nasdaq Composite gained 0.47%. The S&P 500 and Nasdaq both closed at record highs, extending their gains. Stocks have recovered successfully to new heights and volatility has subsided as we continue into the year. 

Though analysts have an optimistic outlook on the market, the economic backdrop still carries some risks. While geopolitical and trade pressures are easing, the uncertainties regarding policy, inflation, and the potential impact of tax legislation related to trade tensions continue to linger. Additionally, the dollar has broadly declined this year, raising some concerns about investors’ confidence in the United States.

The U.S. economy experienced a contraction in the first quarter of 2025, with real GDP decreasing at an annual rate of 0.5%, according to the Bureau of Economic Analysis (BEA). Additionally, the private sector lost 33,000 jobs last month, according to the ADP. That marks the first monthly decline in ADP’s payrolls since 2023. As we wait for June 2025 reports to be released, the Consumer Price Index showed a 0.1% increase in May of this year and a 2.4% increase over the past year.

If you have any questions or would like to schedule a time to chat, please reach out. We hope you are enjoying the summer! 

Stocks

Markets kicked off the summer strongly, continuing their rally we saw in April. All three major U.S. equity indices rose and are now staunchly in positive territory for the year. Continued optimism around the potential for better-than-expected trade policy, and stronger-than-expected economic data drove equities higher. Investor confidence also continued to rise in the wake of more positive economic sentiment. Although much uncertainty remains across the outlook for the rest of the year, and many questions loom ahead of the reciprocal tariffs’ pause date ending on July 9th, markets have begun to price in the stronger earnings seen in the first quarter, and more favorable tariff measures that will not impact earnings as much. In addition to policy headline news, geopolitical headlines initially stoke markets as the conflict in the Middle East escalated, but the escalation appeared limited and is unlikely to have profound impacts on markets. 

Sector Performance

Ten of the eleven sectors posted gains in June, with nine now having turned positive for the year. Sectors sensitive to economic growth, such as Technology and Communication Services, led the rally on the back of continued strong economic data and the optimism that reduced tariffs would lead to stronger consumer demand. Additional hopes on AI spending drove the returns of large tech companies, like the rally seen by the large tech companies in 2023 and 2024. Although monetization of artificial intelligence remains the largest question for the tech sector, continued spending on AI by corporations has led to productivity gains. The only negative sector for the month was consumer staples, which remained up over 6% as a sector, and sold off mainly because of investors adding more risk by selling out of their defensive equities like consumer staples.  

Bonds

Fixed income assets witnessed a rise in prices in June as interest rates fell in response to lower forecasts of inflation, which would allow the Federal Reserve to cut interest rates more times if necessary. The inverse relationship between interest rates and bond prices led to a subsequent rise in bond prices, lagging equities for the month, but posting strong positive returns. The 2-year Treasury yield fell 21.7 basis points, and the 10-year yield fell 21.2 basis points. This fall in interest rates also came as higher geopolitical tensions drove investors to buy safe haven assets, like U.S. Treasuries, which are perceived to carry no credit risk. This buying pressure also helped drive prices up and yields down. The path of interest rates moving forward is likely to depend on the strength of economic growth and rate of inflation relative to the Federal Reserve’s 2% inflation target. 

Economic Update

Despite initial tariffs being applied to the economy, there were few signs of economic strain, especially as most of the measures were temporarily rolled back to allow time for negotiation. The number of jobs added to the economy in May was 139,000—above expectations—and job growth continued throughout the year. The ISM Manufacturing report, a broad measure of manufacturing activity, declined, but was stronger than anticipated. Inflation rose slightly to 2.3% as measured by the Personal Consumption Expenditures Price Index (PCE). This was in line with expectations and remains close to the Federal Reserve’s target of 2%. Gross Domestic Product (GDP) contracted slightly in the first quarter (-0.5%) but that was due to a surge in imports to their highest levels ever seen ahead of tariffs. Imports are subtracted by the GDP calculation. Overall, the economy remains robust and continues to point towards a strong consumer. 

Changing The Way Humans Relate to The natural world

Have you ever wondered how we can utilize advanced technology to gain a deeper understanding of animals and their emotions? This is becoming a reality over in the United Kingdom, as a cutting-edge research center designed to transform our understanding of animals’ feelings will launch this fall at the London School of Economics. The Jeremy Coller Center for Animal Sentience is the world’s first facility to utilize the emerging science of animal minds to inform the design of policies, laws, and practices for caring for other animals and their environments.  

The center will bring together top thinkers from diverse fields, including philosophy, neuroscience, artificial intelligence, and biology. Initially, the research will be divided into three main categories: devising frameworks for the ethical use of AI regarding animals, revising welfare laws to safeguard insects and other invertebrates, and developing informative campaigns to shift public beliefs and attitudes. The center’s director, Jonathan Birch, believes the project will transform the way humans interact with the natural world. He states, “Our center can change the conversation in the United Kingdom and beyond and help us rediscover who we are”.

Birch suggests that current advances in AI have presented both a risk to animal welfare and a tool for helping us better understand our animal neighbors. Experts believe the center can potentially help decode animal communication, and in turn, better protect all the planet’s creatures and their environments. Birch states, “Some might say it’s an impossible dream, but the boundary between the ‘possible’ and the allegedly ‘impossible’ is one we aim to move”. 

The center’s efforts aim to introduce new codes of practice for farming invertebrates, such as insects, and to install stronger protection for ocean life, including crabs and lobsters. The team is also hoping to develop AI systems that can better account for animal welfare, for example, incorporating movement detection for all sizes of animals with the expansion of driverless cars.

The team aims to bridge the gap between the self-image of “animal lovers” and the reality of indifference to animal welfare. To read more about this groundbreaking research on our impact on animals, read the full article.

THOUGHT FOR THE MONTH

^{Index Definitions}

^{Dow Jones Industrial Average:The Dow Jones Industrial Average® (The Dow®), is a price-weighted measure of 30 U.S. blue-chip companies. The index covers all industries except transportation and utilities.}

^{Dow Jones U.S. Real Estate Total Return Index:The index is designed to track the performance of real estate investment trusts (REIT) and other companies that invest directly or indirectly in real estate through development, management, or ownership, including property agencies.}

^{NASDAQ Composite:The NASDAQ Composite is a market-cap weighted index of all issues listed on the Nasdaq stock exchange. It is heavily weighted towards the technology sector.} 

^{S&P 500 Bond Index:The S&P 500® Bond Index is designed to be a corporate-bond counterpart to the S&P 500, which is widely regarded as the best single gauge of large-cap U.S. equities. Market value-weighted, the index seeks to measure the performance of U.S. corporate debt issued by constituents in the iconic S&P 500.}

^{S&P 500 Consumer Discretionary:The S&P 500® Consumer Discretionary comprises those companies included in the S&P 500 that are classified as members of the GICS® consumer discretionary sector.}

^{S&P 500 Consumer Staples:The S&P 500® Consumer Staples comprises those companies included in the S&P 500 that are classified as members of the GICS® consumer staples sector.}

^{S&P 500 Energy:The S&P 500® Energy comprises those companies included in the S&P 500 that are classified as members of the GICS® energy sector.}

^{S&P 500 Financials:The S&P 500® Financials comprises those companies included in the S&P 500 that are classified as members of the GICS® financials sector.}

^{S&P 500 Index:The S&P 500® index is a market-cap weighted index of the largest 500 companies headquartered in the United States. The index covers approximately 80% of available market capitalization.}

^{S&P 500 Utilities:The S&P 500® Utilities comprises those companies included in the S&P 500 that are classified as members of the GICS® utilities sector.}

^{S&P U.S. Aggregate Bond Index:The S&P U.S. Aggregate Bond Index is designed to measure the performance of publicly issued U.S. dollar denominated investment-grade debt. The index is part of the S&P AggregateTM Bond Index family and includes U.S. treasuries, quasi-governments, corporates, taxable municipal bonds, foreign agency, supranational, federal agency, and non-U.S. debentures, covered bonds, and residential mortgage pass-throughs.}

^{S&P U.S. Treasury Bond Index:The S&P U.S. Treasury Bond Index is a broad, comprehensive, market-value weighted index that seeks to measure the performance of the U.S. Treasury Bond market.}

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