July Market Review: Record Highs During a Turbulent Month

Sean Gross, CFP®, AIF®

Co-Founder & CEO

August 4, 2025

July witnessed the S&P 500 achieving ten fresh all-time highs, driven by robust corporate earnings results, steady economic indicators, and newly negotiated trade agreements before the tariff implementation deadline. The index recorded six straight record closing levels during the month's latter half, contributing to a 7.8% year-to-date advance for the S&P 500.

Nevertheless, market volatility and economic uncertainty emerged toward month-end. The July 31 tariff rate announcement has sparked worries about increased consumer costs. Furthermore, July's employment report disclosed that labor market conditions have been significantly weaker over the preceding three months than initially reported.

Given this backdrop, investors should maintain composure as markets respond to fresh trade policies and economic information. Recent months demonstrate how rapidly conditions can shift, reinforcing that a flexible, long-term investment approach remains the most effective strategy for reaching financial objectives.

Primary Market and Economic Developments

• July returns showed the S&P 500 advancing 2.2%, the Dow Jones Industrial Average climbing 0.1%, and the Nasdaq increasing 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 climbed 1.7%.

• Second quarter GDP expanded at a 3.0% annualized pace, primarily due to renewed business investment activity and import changes related to tariff policies.

• The U.S. dollar index recovered from June's 96.88 close to finish July at 99.97, though it remains significantly lower for the year.

• Bitcoin reached a record high of $120,198 mid-month before concluding July at $116,491.

• Gold prices stayed elevated but remained below recent peaks, finishing the month at $3,293.

• Copper hit record levels due to specific tariffs but subsequently experienced its largest single-day decline of 22%.

• The Consumer Price Index increased 2.7% year-over-year in June, matching economist forecasts.

• July job creation totaled just 73,000 positions. Substantial downward adjustments to May and June data revealed the economy performed much worse than initially calculated. The unemployment rate held steady at 4.2%.

Equity markets achieved fresh record levels

 

The second quarter earnings reporting period that began in July continues delivering positive results, propelling markets to new heights. Although numerous companies have noted some tariff-related impacts, the effects have not been uniformly negative. Among the more than one-third of S&P 500 companies that have reported, 80% delivered earnings-per-share beats. The combined earnings growth rate now stands at 6.4% annually, which trails recent quarters but exceeds Wall Street analyst projections[1].

Artificial intelligence optimism boosted several Magnificent 7 names. 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 posted underwhelming second quarter results, pressuring its share price.

Although technology shares have experienced mixed performance in 2025, the Information Technology sector has gained over 13% year-to-date, trailing only Industrials which has returned more than 15% thus far in 2025. Health Care and Consumer Discretionary stocks have underperformed and remain negative for the year.

Fixed income markets saw relatively subdued activity, 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-related inflation concerns with economic growth considerations. Notably, two Fed governors opposed the decision for the first time since 1993, favoring a quarter-point reduction. This follows ongoing public disagreement between President Trump and Fed Chair Powell as the administration continues pressing for lower interest rates.

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

Market participants monitor new trade agreements and tariff developments

Throughout July, the White House announced multiple new trade agreements, including arrangements with the European Union, Japan, and South Korea. Negotiations with China remain ongoing. These agreements prevent the worst-case outcomes 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 (replacing the previous August 1 deadline), as illustrated in the accompanying chart.

According to Yale Budget Lab estimates as of July 23, consumers now face an overall effective tariff rate of 20.2%, the highest level since 1911. Thus far, companies appear to have absorbed much of this additional cost rather than transferring it to consumers. Whether this pattern continues depends on final tariff levels and companies' adaptive capabilities.

Congress enacted significant tax and cryptocurrency legislation

Bitcoin achieved new peaks in July as Congress evaluated fresh cryptocurrency regulation. The administration's perceived support for broader cryptocurrency adoption has generated Bitcoin gains in 2025. Additionally, the GENIUS Act, now signed into law, addresses stablecoins 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. The bill enhances investor certainty by preserving the current low-tax framework but raises questions about the growing national debt's sustainability.

The Congressional Budget Office (CBO) projects the legislation will increase the national debt by over $3 trillion during the next decade. While the bill included spending reductions to major programs, these were exceeded by tax revenue decreases. However, it should be noted that the CBO has a well-documented history of issuing wildly inaccurate forecasts which tend to overestimate the cost of tax cuts and underestimate the cost of spending programs.[2]

The permanent status of many tax modifications eliminates uncertainty that has influenced long-term financial planning, given that several TCJA provisions were set to expire this year. This development could support business investment and consumer expenditure in the near term.

The bottom line? Markets established numerous records during a volatile month featuring tariff uncertainty, new tax legislation, and earnings reports. Entering August, trade agreements and earnings results will likely continue capturing investor attention.

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[1]https://advantage.factset.com/hubfs/Website/Resources%20Section/Research%20Desk/Earnings%20Insight/EarningsInsight_072525.pdf  

[2] Dublois, H., & Carlsen, T. (2024, August 19). Scoring CBO’s Scores: Ten of the Worst CBO Blunders of the  21st Century So Far. Foundation for Government Accountability™. https://thefga.org/research/scoring-  cbos-scores-ten-of-the-worst-cbo-blunders/