US ECONOMY
📈 1. Stock markets surge: sustained record highs
On Thursday, July 3, major U.S. indices closed at all-time highs. The S&P 500 hit a new record, while the Nasdaq Composite and Dow Jones also extended their rally (reuters.com).
The S&P rose by about 0.8%, closing at 6,279, while the Nasdaq jumped 1%, ending at 20,601.
The Dow gained roughly 344 points, approaching within 1% of its previous all-time high.
What’s driving this? Strong job growth: 147,000 jobs were added in June, beating expectations, which boosted investor confidence in the economy's resilience.
However, in earlier sessions (July 1–2), markets showed volatility: the S&P and Nasdaq dipped slightly as tech stocks like Tesla, Nvidia, Broadcom, and AMD corrected, while the Dow held up thanks to UnitedHealth and Nike.
🏦 2. Labor market: resilient but with mixed signals
Employment:
The U.S. added 147,000 jobs in June, beating the 110,000 estimate.
Unemployment dropped slightly to 4.1%.
Wage growth slowed to 3.7% YoY, the lowest in a year.
Most job gains came from state and local governments, while federal hiring declined for the sixth straight month.
Conclusion: The labor market remains strong overall, but with signs of cooling — especially in private-sector hiring.
Implications:
The stronger-than-expected jobs report diminished chances of a Fed rate cut this month — futures showed less than a 5% probability.
Some analysts warn of a weaker job phase in H2 2025, posing potential risk to stock and bond valuations.
💵 3. Fed policy: cautious patience with rates
Despite strong growth, the Federal Reserve remains cautious. Fed Chair Jerome Powell emphasized the need to watch how tariffs might affect growth and inflation.
Rate outlook:
Markets still expect up to three rate cuts by September.
But with solid jobs data and sticky inflation, futures now see only ~5% chance of a rate cut at the next meeting.
Bottom line: The Fed is holding steady. A potential rate cut in early fall will depend on future economic and labor market data.
🔧 4. Trade tariffs: the July 9 deadline looms
All eyes are on the potential tariff hikes scheduled for July 9, 2025.
The U.S. signed deals with Vietnam and the UK, and reached partial understanding with China, which temporarily eased concerns.
Nonetheless, effective average tariff rates have climbed from 3% to 13% in 2025.
Risks:
Higher tariffs raise inflationary pressure by increasing import costs (energy, goods, food).
Economic growth could slow without more trade clarity.
Markets remain hopeful that some tariffs will be delayed or softened before the deadline.
🏛️ 5. Fiscal reform: "One Big Beautiful Bill"
The U.S. House passed the sweeping fiscal package dubbed the "One Big Beautiful Bill", which:
Makes the 2017 tax cuts permanent for individuals and corporations.
Slashes funding for Medicaid and clean energy incentives.
Expands defense and immigration spending.
The Congressional Budget Office forecasts this will raise the deficit to 7% of GDP by 2026, adding $3.4 trillion in debt.
Market impact:
Investors have largely priced in the bill.
Sectors like energy, industrials, financials, and consumer discretionary may benefit.
However, concerns are growing over rising inflationary pressure and long-term fiscal instability.
💣 6. Geopolitics: new Iran sanctions
The U.S. issued a first round of financial sanctions on Iran, following the end of the 12-day Iran-Iraq conflict.
Sanctions target individuals and infrastructure involved in oil smuggling.
Although indirect, these could influence oil prices and heighten geopolitical risk, impacting global financial markets.
🤖 7. AI transforms investment strategies
A quieter but profound trend: AI is reshaping investment portfolios, especially among institutional investors.
The traditional 60/40 (stocks/bonds) model is being reimagined — shifting toward private equity and credit markets.
Algorithms are helping institutions anticipate macro shifts (inflation, defense spending, trade policy).
AI is becoming a "new compass" for asset allocation, with emphasis on flexibility and predictive analytics.
🔍 8. Outlook for H2 2025: six key questions
Reuters identified six big questions that will drive the second half of 2025:
Will tariffs actually kick in July 9? Trade clarity will dictate risk appetite.
When will the Fed cut rates? Expectations still point to fall.
Will tech continue to dominate? Nasdaq vs. S&P and equal-weighted benchmarks diverge.
Are current valuations sustainable? The S&P forward P/E is 22.2, above the 10-year average of 15.8.
Will U.S. assets stay globally attractive? Currency trends and global comparison matter.
Will geopolitical risk trigger volatility? Iran, tariff wars, and new legislation could shake markets.
📊 9. Summary Table
Key Area
Current Status
Stock Markets
S&P, Nasdaq, and Dow at record highs; tech leads but volatile.
Labor Market
147K jobs added; 4.1% jobless rate; wage growth slows.
Fed Policy
Holding rates; potential cuts in Q3–Q4 depending on inflation/jobs.
Tariffs
Effective rates at 13%; possible new hikes on July 9.
Tax Policy
Tax cuts made permanent; federal deficit to rise.
Geopolitics
New Iran sanctions could lift oil risk premium.
Investment Trends
AI drives shift to private markets; big tech still dominates.
🎯 10. What investors should watch next
Tariff policy by July 9: any delay or enforcement will directly hit markets.
Macro data: especially CPI, PCE, and employment figures for July–August.
Fed decisions: FOMC minutes and comments from Powell will shape expectations.
Geopolitical tensions: Iran sanctions, global trade talks, and defense spending.
Tech & AI investing: Watch institutional shifts into new sectors and private assets.
✅ Final thoughts
The U.S. economy shows continued resilience supported by:
Record-high stock markets
A still-strong labor market
Cautious but patient Fed policy
However, the path forward is not without risks:
Rising tariffs
Expanding budget deficits
Renewed geopolitical uncertainty
The second half of 2025 will likely define whether the U.S. transitions into a soft landing, a prolonged rally — or a volatile reset.
Smart investors will:
Monitor key macro trends,
Diversify across asset classes, and
Stay flexible in light of shifting policy and economic dynamics.
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