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In this month’s recap: Trade deals, Fed meeting, labor market stunner

Presented by The PensionmarkMeridien Team, August 2025

MARKET RECAP
July was chock-full of key economic developments, from monumental legislation and trade deal fluctuations to a tense Fed meeting and labor market weakness. With all of this activity, I wanted to reach out today with a quick overview of what to know as we head into August.

MAJOR U.S. STOCK INDEXES
Volatility remained low, and the S&P 500 and the NASDAQ 100 hit record highs in July, as trade policy volatility was the defining force for bulls and bears. Overall:

• The S&P 500 rose 2.2%.
• The Dow Jones Industrial Average declined by 0.2%.
• The NASDAQ 100 increased by 2.4%.

ONE BIG BEAUTIFUL BILL ACT & CRYPTO LEGISLATION
The “One Big Beautiful Bill Act¹” was signed into law on July 4, 2025¹, ushering in a range of financial and tax changes for Americans. Key highlights include a permanent increase in estate and gift tax exemptions, an extension of lower income tax rates, and a higher standard deduction. However, the legislation also introduces significant cuts to Medicaid funding alongside tighter eligibility restrictions.

Shortly after, on July 18, the “Genius” Act—officially titled The Guiding and Establishing National Innovation for U.S. Stablecoins Act of 2025²—was enacted as the first federal law specifically addressing dollar-backed stablecoins. These cryptocurrencies maintain a stable value by being backed 1:1 by traditional assets such as U.S. dollars or Treasury bills.

While the law offers regulatory clarity and potential investor benefits, stablecoins still carry inherent risks, including reduced consumer protections and possible technological and operational vulnerabilities.

-QUOTE OF THE WEEK-

“Success is not final, failure is not fatal: it is the courage to continue that counts.”

— Winston Churchill

TRADE DEAL PROGRESS & EFFECTIVE DATE EXTENSION
As the extended tariff deadline³ of August 2 approached, the United States secured several important trade agreements, including deals with the United Kingdom and Japan. These developments were welcomed by markets and contributed to positive investor sentiment.

However, an additional tariff deadline on August 7 looms for countries without finalized agreements—among them significant trading partners like China and Mexico—creating uncertainty in the near term.

GDP STRENGTH & EARNINGS SEASON
After experiencing a 0.5% decline in gross domestic product (GDP)⁴ during the first quarter of 2025—primarily due to companies accelerating imports ahead of tariff implementations—GDP rebounded strongly in the second quarter with a 3% increase⁵.

As of August 1, 66% of S&P 500 companies have reported earnings, with 82% surpassing analysts’ earnings per share (EPS) estimates. This percentage is above the five- and ten-year averages, a generally positive indicator for investors and the economy. However, these encouraging earnings results were somewhat overshadowed by weaker-than-expected job market data at the start of the month.

To read what we had to say in our July’s Economic Recap

INFLATION DATA PUZZLE & CONSUMER VIBES IMPROVE
June’s inflation data, released in July, painted a mixed picture. The Consumer Price Index (CPI) rose by 0.3%—⁶ the largest monthly increase since January—while the Producer Price Index (PPI) remained flat⁷, showing a 0.0% change. Since producer prices often act as leading indicators, this flat PPI may signal future inflation trends.

On the retail front, June sales increased by 0.6%, well above the expected 0.1% gain and rebounding from the prior month’s 0.9% decline. It’s important to note that this sales figure is not adjusted for inflation, so some growth may reflect higher prices driven by tariffs. After nearly six months of declining consumer sentiment, the University of Michigan’s Consumer Sentiment Index improved in both June and July, and the Conference Board’s consumer confidence reading also rose in July, though overall sentiment remains below last year’s levels.

FEDERAL RESERVE MEETING
At its July 29–30 meeting, the Federal Reserve maintained its benchmark interest rate in the 4.25%–4.5% range. Notably, two members of the Fed’s Board of Governors dissented, advocating for a 0.25% rate cut—a rare occurrence not seen in over 30 years. This dissent occurred amid calls for rate reductions from President Donald Trump and his administration, though the Fed operates independently. In the post-meeting press conference, Fed Chair Jerome Powell⁸ noted that tariffs are beginning to affect prices for certain goods, but he characterized these as likely one-time adjustments with uncertain long-term impact.

Powell also described the labor market as “broadly in balance,” softening his previous characterization of it as tighter, though he acknowledged future conditions could worsen. His remarks came prior to the release of July’s jobs report, which later revealed significant weakening in the labor market.

WEAK JOBS DATA POINTS TO ECONOMIC SOFTENING
The July jobs report showed that employers added only 73,000 jobs in June, and previously reported figures for May and June were dramatically revised downward. In an unprecedented reaction, President Trump dismissed the Bureau of Labor Statistics commissioner following the data release. May’s jobs gain was revised from 144,000 to just 19,000, and June’s preliminary 133,000 figure was lowered to 14,000⁹.

These revisions mark the weakest job creation outside of recession periods in decades, with June’s data reflecting the softest labor market since December 2020¹⁰, mid-pandemic. Given that recessions are typically declared only after they have begun, it remains unclear whether the U.S. economy is entering a recession or is already in one. Amid this uncertainty, long-term investing continues to be a prudent strategy to navigate economic fluctuations.

LOOKING AHEAD
A lot happened in July. Indeed, maintaining a long time horizon can help investors avoid making hasty decisions with lasting consequences. If you have questions about the economy, the market, or your portfolio, I am always here as a resource for you.

Do not hesitate to respond to this email or give the office a call.

STAY AHEAD.

We are here to help you navigate what’s ahead, please don’t hesitate to reach out.

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Please consult your financial professional for additional information. This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security.

Citations:

1. USA Facts July 3, 2025
2. The National Law Review, July 22, 2025 ,
3. ABC News, July 2025
4. BEA.gov, July 30, 2025
5. Yahoo Finance, June 18, 2025
6. U.S. Bureau of Labor Statistics, July 14, 2025
7. Reuters, July 16, 2025
8. Federal Reserve, July 30, 2025,
9. The Guardian, August 1, 2025
10. CNN, July 31, 2025