Week in Review: August 1 2025

August 4, 2025

Recap & Commentary

Markets ended lower, following a busy week filled with 2Q corporate earnings reports, economic data, new trade deals and tariffs, the Fed’s July rate decision, and the unexpected firing of the head of the Bureau of Labor Statistics.

As expected, the Fed left rates unchanged following its July meeting. Notably, two Fed members dissented, marking the first time since 1993 that more than one member dissented from a rate decision. Both dissenting members favored a 0.25% rate cut, concerned about slowing conditions. Speaking afterwards, Fed Chair Jay Powell noted the dissenters offered a clear explanation of their rationale. Powell also said the majority of the committee feels current economic conditions warrant a “modestly restrictive” stance on monetary policy.

Over the course of the week, the US announced several new trade deals, most notably with South Korea whose exports to the US will be subject to a 15% tariff. In addition, Trump announced a 90-day extension of negotiations with Mexico, a 30% tariff on Canadian imports, up from the prior level of 25%, a 25% tariff on goods from India, and a 50% tariff on all copper imports.

On Friday, following weak employment data, President Trump unexpectedly fired the head of the Bureau of Labor Statistics, the government agency responsible for calculating data related to employment, price changes, and productivity, saying the data was “rigged”. Markets reacted negatively to the news, concerned it could undermine trust in the integrity of government data, upon which business leaders and investors rely to make key decisions. Later, a White House official said Trump “wants his own people there.”

Economic Commentary

Second quarter GDP growth of 3.0% easily exceeded the 2.5% forecast, led by a significant decline in imports, which are a subtraction from GDP, and increased consumer spending. The slower pace of imports contributed over 5% to GDP growth. However, that was partially offset by a large decline in business spending on inventories. Those two factors were largely opposite in 1Q25, when businesses rushed to fill inventories ahead of Trump’s April tariff announcement. Over the first half of the year, the economy grew a modest 1.2%.

Nonfarm payrolls added just 73K jobs in July, while the prior two months were revised down by a combined 258K, bringing the average pace of job growth over the past three months to 35K. Unemployment rose 0.1% to 4.2%, leaving it range bound between 4.0% and 4.2% for the 15th consecutive month.

The Fed’s preferred measure of inflation, core personal consumption expenditures (PCE) rose 0.3% in July, up from June’s 0.2% pace. Compared to a year ago, core PCE rose 2.8%, slightly higher than the 2.7% forecast. The readings supported Fed Chair Jay Powell’s assertion following the Fed’s July meeting that inflation remains “a bit above target.”

Manufacturing activity fell to a nine-month low, contracting at its fastest pace since October 2024. Employment was notably weak matching July 2024 for the fastest pace of contraction since June 2020. Demand improved slightly with new orders contracting at a slightly slower rate than in June.

Of Note

Through Friday, 66% of S&P 500 companies had reported with 2Q earnings, with 82% of those exceeding analyst estimates. Last week saw “Mag 7” constituents, Microsoft, Apple, and Meta all report strong 2Q earnings “beats.”

Market Indices (As of 08/01/2025)

• ISM Services
• Trade Balance
• Factory Orders
• Initial Jobless Claims