There was yet more tariff whiplash over the weekend as the US and Canada appeared to kiss and make up after the the previous Friday’s trade squabble. Trump then turned his rage on the world’s fourth largest economy, calling Japan “very spoiled” and demanding that it buy more American rice .. or else. The deficit-exploding, multi-trillion dollar tax and spending bill (TSB) inched closer to becoming law on Sunday, although in exactly what form was still unclear.
Monday brought the first half of the year to a close with stocks at record highs, something that was pretty much unimaginable in early April. A holiday-shortened three-and-a-half day trading week kicked off on a positive note with the stock indexes creeping further into record territory.
The second half of 2025 began on Tuesday with yet another Trump tirade against Fed chairman Powell who is apparently a “moron” for resisting the president’s shrieking demands for an immediate cut in the Fed Funds interest rate from 4.33% to 1.33%.
Trump also ripped into his ex-BFF who has variously described the president’s beloved TSB as “insane”, “debt slavery” and “a disgusting abomination”, threatening Musk’s businesses with an ironic DOGE audit and even claimed to be “looking into” the idea of deporting the South African dual citizen. This all sent the price of Tesla stock spiraling lower to below a trillion dollar valuation and close to 40% down from its highs of less than seven months ago. This weighed on the indexes at the opening bell.
The TSB squeaked through the Senate but required Vance’s tie-breaking vote to do so and ping-ponged back to the House for a final sign-off. Stocks experienced a choppy session without much direction with a long weekend on the horizon (albeit with a Jobs Report on Thursday), eventually closing a touch lower.
Rising worries in the ether about a potential adverse market reaction if that Jobs Report the following day were to disappoint kept something of a lid on stock prices on Wednesday morning.
While lawmakers frantically fumbled around with procedural votes on the floor of the House desperately trying (and failing) to pass the TSB that day, the announcement of an apparent US/Vietnam trade deal spiked the prices of a number of retail stocks and flickers of hope about a possible July Fed rate cut helped carry the S&P 500 and the NASDAQ cautiously higher to once again close at, you guessed it, more new all-time highs.
Thursday was a half-day for the stock market before the long weekend, but the latest Jobs Report released before the opening bell certainly had Wall Street’s full attention. It was far stronger than expected with the unemployment rate falling to 4.1% and 147k new jobs created in June. Under the hood, the numbers showed a narrative of lower hiring but still-low firing.
Stock traders breathed a sigh of relief at this indication of a still-strong economy and the prospect of continued solid corporate earnings (Q2 results season begins on July 15th) and kept the indexes nicely in the green through to the early close, extending their record highs.
This was despite a jump in shorter term market interest rates which are the most sensitive to expectations for Fed policy as the solid Jobs Report slammed the door shut on any hopes of a July Fed rate cut and the odds of a cut in September fell sharply in a matter of minutes from 75% to 67%. The most common number of expected 0.25% rate cuts for the rest of the year dropped from three to two (see FEDWATCH INTEREST RATE TOOL below).
The tiresome TSB soap opera in Congress at long last came to its inevitable conclusion on Thursday afternoon. Enough critics of the bill were ultimately strong-armed into submission and it was finally waved through by the House and signed into law by the president.
Here is a good summary of the legislation enacted by the passage of the bill.
You can check here on the impact of the new law on your own individual situation.
The S&P 500 ended the first half of the year last week 5.5% higher than it closed on New Year’s Eve, a remarkably small change given the turbulence and chaos that characterized the whole six-month period (see ARTICLE OF THE WEEK below). This emphasizes the folly of regular investors who respond on a daily or weekly basis to non-stop swings in either direction by making multiple reactive investment decisions.
Always keep the bigger picture in mind and pull your head out of the intra-day weeds and minutiae. Best to leave all that stuff to be pored over by short-term institutional traders and writers of weekly financial market recaps.
Another interesting factoid from the first half of 2025 is that European stocks outperformed their US peers by 16% points (the Stoxx Europe 600 index rose by 21.5% vs 5.5% for the S&P 500), which is the biggest margin ever recorded, finally rewarding patient investors who have stuck with geographic diversification beyond just US markets. Also boosting returns for US-based investors in foreign markets was the 10%+ tumble in the value of the US Dollar over the last six months, its biggest such fall since 1973.
If you are not yet a client of Anglia Advisors and would like to explore becoming one, please feel free to reach out to arrange a complimentary no-obligation discovery call with me.
ARTICLE OF THE WEEK ..
What Wall Street got wrong in the first half of 2025.
.. AND I QUOTE ..
“I watch financial markets every day because they’re so fascinating, so beautiful, like art. But my personal finances are simple and boring.”
Morgan Housel, author, columnist and partner at Collaborative Fund
LAST WEEK BY THE NUMBERS:
Last week’s market color courtesy of finviz.com
Last week’s best performing US sector: Basic Materials (two biggest holdings: Linde, Sherwin Williams) ⬆︎ 4.1% for the week
Last week’s worst performing US sector: Utilities (two biggest holdings: Next Era Energy, Southern Co.) ⬆︎ 0.8% for the week
SPY, the S&P 500 Large Cap ETF, tracks the S&P 500 index, made up of 500 stocks from a universe of the largest US companies. Its price rose 2.2% last week, is up 6.7% so far this year and ended the week at its all-time record closing high.
IWM, the Russell 2000 Small Cap ETF, tracks the Russell 2000 index, made up of the bottom two-thirds in terms of company size of a universe of 3,000 of the largest US stocks. Its price rose 3.6% last week, is up 1.0% so far this year and ended the week 9.8% below its all-time record closing high (11/08/2021).
INTEREST RATES:
FED FUNDS * ⬌ 4.33% (unchanged)
PRIME RATE ** ⬌ 7.50% (unchanged)
3 MONTH TREASURY ⬆︎ 4.42% (4.39% a week ago)
2 YEAR TREASURY ⬆︎ 3.88% (3.73% a week ago)
5 YEAR TREASURY ⬆︎ 3.94% (3.83% a week ago)
10 YEAR TREASURY *** ⬆︎ 4.35% (4.29% a week ago)
20 YEAR TREASURY ⬆︎ 4.87% (4.85% a week ago)
30 YEAR TREASURY ⬆︎ 4.86% (4.85% a week ago)
Data courtesy of the Federal Reserve and the Department of the Treasury as of the market close on Friday.
* Decided upon by the Federal Reserve. Used as a basis for interbank loans and for determining high yield savings rates.
** Wall Street Journal Prime rate. Used as a basis for determining many consumer loan rates such as credit cards, personal loans, home equity, securities-based lending and auto loans.
*** Used as a basis for determining mortgage rates.
AVERAGE 30-YEAR FIXED MORTGAGE RATE:
⬇︎ 6.67%
One week ago: 6.77%, one month ago: 6.85%, one year ago: 6.95%
Data courtesy of: Freddie Mac Primary Mortgage Market Survey
FEDWATCH INTEREST RATE TOOL:
Where will the Fed Funds interest rate be after the next rate-setting meeting on July 30th?
Unchanged from now .. ⬆︎ 95% probability (81% a week ago)
0.25% lower than now .. ⬇︎ 5% probability (19% a week ago)
What is the most commonly-expected number of remaining 0.25% Fed Funds interest rate cuts in 2025?
⬇︎2 (down one from a week ago)
All data based on the Fed Funds interest rate (currently 4.33%). Calculated from Federal Funds futures prices as of the market close on Friday. Data courtesy of CME FedWatch Tool.
FEAR & GREED INDEX:
“Be fearful when others are greedy and be greedy when others are fearful.” Warren Buffet.
The Fear & Greed Index from CNN Business can be used as an attempt to gauge whether or not stocks are fairly priced and to determine the mood of the market. It is a compilation of seven of the most important indicators that measure different aspects of stock market behavior. They are: market momentum, stock price strength, stock price breadth, put and call option ratio, junk bond demand, market volatility and safe haven demand.
Extreme Fear readings can lead to potential opportunities as investors may have driven prices “too low” from a possibly excessive risk-off negative sentiment.
Extreme Greed readings can be associated with possibly too-frothy prices and a sense of “FOMO” with investors chasing rallies in an excessively risk-on environment . This overcrowded positioning leaves the market potentially vulnerable to a sharp downward reversal at some point.
A “sweet spot” is considered to be in the lower-to-mid “Greed” zone.
Data courtesy of CNN Business as of Friday’s market close.
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