Weekly Investment Update (07/11/2025)

Despite a renewed escalation in global trade tensions this week, markets continued to push higher. Signs of investor confidence — and perhaps growing complacency — are evident. Bitcoin has reached new highs, while gold prices have stalled, signaling a clear “risk-on” tilt. The VIX (a measure of expected market volatility) has dropped below 16 for the first time since February, while both Nvidia and Broadcom have hit fresh record highs.

At the same time, economic data have begun to soften, and tariff-driven price pressures could push inflation higher in the third quarter. We view this as a temporary soft patch in growth alongside a temporary inflation bump — not a shift toward stagflation. Structural themes like AI continue to support capital investment and earnings, reinforcing our positive outlook for the second half of the year.

Looking ahead, recently passed tax legislation should deliver meaningful fiscal stimulus in 2026, with front-loaded provisions such as full expensing for equipment, expanded R&D credits, and enhanced small business deductions. While trade and inflation developments bear watching, economic and earnings fundamentals remain solid. That said, with multiple crosscurrents in play, we would not be surprised to see a pickup in volatility as the third quarter unfolds.

Trump Administration Extends Tariff Negotiation Deadline While Simultaneously Announcing New Rates for More Than 20 Countries

What is happening: On Monday, President Trump signed an executive order extending the implementation of reciprocal tariffs from July 9 to August 1. The administration also sent letters to more than 20 countries indicating new tariff rates if no trade deal is reached by August. For most countries, the new rates are very similar to those initially announced on April 9. The letters target several key U.S. trading partners that have not yet completed negotiations. Japan and South Korea are set to face 25% tariffs on their exports to the U.S. while Brazil’s rate was increased to 50%. Separately, on Wednesday, Trump announced that 50% tariffs on copper imports will also go into effect on August 1. 

Why it matters: Tariffs continue to be a part of the administration's broader strategy to address trade imbalances and encourage reciprocal trade practices. The extension of the negotiation deadline provides additional time for the U.S. and its trading partners to negotiate trade agreements. However, there remains a high degree of uncertainty regarding the final rates, and there is still the possibility of additional industry level tariffs on pharmaceuticals and electronics.

The new tariff rates announced on Monday also immediately follow the enactment of the One Big Beautiful Bill Act (OBBBA), which President Trump signed into law on July 4. The finalized OBBBA is projected to cost $600 billion more than the original House bill over the next 10 years. The new tariffs announced this week are estimated to generate more than $60 billion of additional revenue each year relative to the current rate, so they could potentially offset the increased spending in the OBBBA. However, higher tariffs can cause changes to consumer spending habits and supply chains, so the actual amount of revenue collected could be lower than current projections. Moreover, it’s likely that at least some of the countries that received letters this week will be able to negotiate their rates down by August 1.

The recent tariff developments have coincided with clearer signs of slowing economic growth in the U.S., such as slower retail sales and wage growth, but the new rates by themselves are unlikely to push the U.S. economy into a recession in the near term. Even if all these tariffs are implemented on August 1 with no changes, they are estimated to raise the effective tariff rate by less than 2%. While that could have a marginal negative impact on GDP, it could also push the Federal Reserve to loosen monetary policy more aggressively later this year. Overall, the full economic impact will be more dependent on the magnitude of the affected countries’ retaliatory responses, which could have a bigger effect on American exporters and multinational companies.

The June Jobs Report Aligns with FOMC Minutes on a Cooling Labor Market

What is happening: The U.S. economy added 147K jobs in June, exceeding estimates and landing roughly in line with the average monthly gain of 146K over the prior 12 months. Job growth for the prior two months was revised upward, while the three-month moving average increased to 150K from 141K in May. The headline report offers reassurance that the labor market remains stable, though the details show that gains were primarily concentrated in state and local government, which increased by 80K on the month, the largest gain since March 2024. The unemployment rate unexpectedly dropped from 4.2% to 4.1%, although this was primarily due to a decrease in the labor participation rate as the number of job seekers decreased by more than 200K.

The mixed jobs report aligns with the latest Federal Open Market Committee (FOMC) minutes, which provide insight into the rationale for policy decisions. The minutes showed policymakers still view the labor market as solid, though most participants suggested that heightened uncertainty could weigh on labor demand, with many expecting a gradual softening of conditions.

Why it matters: The jobs report and FOMC minutes highlight how the rapidly evolving economic policy backdrop has complicated monetary policy making. The recent stability in the labor market is likely due in part to a slowing in both hiring and layoffs, as elevated levels of uncertainty weigh on corporate decision making. Initial jobless claims are relatively steady, but rising continuing claims suggest that while firms are not significantly reducing headcount, job losers are finding it more difficult to find a new one. This trend aligns with the FOMC’s view that, while the labor market remains stable, there are signs of gradual cooling.  

Overall, the FOMC minutes suggest that the U.S. economy remains stable, providing room to be patient with interest rate cuts in the face of tariff-related inflation risks. That said, we continue to believe the Fed will resume rate cuts in the second half of the year as the impact of tariffs on consumer prices becomes clearer and the labor market softens, somewhat reducing inflationary pressure.