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Markets Take a Breather After Hitting Record Levels
After a strong two-week rally that pushed the S&P 500 up more than 5%, markets took a breather, ending the week slightly lower and pulling back from record highs set the previous week. Global equities, as measured by the MSCI All Country World Index (ACWI), declined 0.41%, while U.S. equities, represented by the S&P 500, slipped 0.29%. The decline came as President Trump announced new tariffs on imports from more than 20 countries. The proposed tariffs, ranging from 20% to 50%, are set to take effect on August 1 unless new trade agreements are reached before then.
U.S. Treasury
It was a volatile week in Treasury markets as yields on U.S. government bonds declined midweek after minutes from the latest Federal Reserve meeting raised expectations for interest-rate cuts later this year. However, yields reversed course and climbed on Friday amid escalating trade tensions. The yield on the 10-year U.S. Treasury rose to approximately 4.42% by Friday afternoon, up from 4.35% at the end of the previous week.
Earning Season Begins
Earnings season kicks off this week with major U.S. banks leading the way. Analysts expect S&P 500 earnings to rise 4.8 percent, marking the slowest pace of growth since late 2023 amid persistent concerns about slowing economic momentum. Despite these headwinds, a strong U.S. consumer may provide companies with a critical cushion to help sustain revenue and profits. Investors will be closely watching for signs of resilience or weakness in corporate performance. These reports will play a key role in assessing the health of the economy and shaping market expectations for the second half of the year.
Looking Ahead
In the week ahead, alongside the start of earnings season, all eyes will be on Tuesday’s Consumer Price Index (CPI) report. This data will reveal whether the recent trend of mostly stable inflationary pressures continued through June. Last month’s CPI showed an annual increase of 2.4%, in line with expectations and just above April’s four-year low of 2.3%. Investors and policymakers alike will be watching closely, as sustained inflation stability could influence Federal Reserve decisions on interest rates in the coming months.
As Always
I’d like to leave you with the final line we’ve used since we started these commentaries back at the very height of market volatility in March 2020. Always remember that we create financial/investment plans not for the easy times, but to prepare for the tough ones.
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