Weekly Market Sparks 08/04/25

Rusty Vanneman

— 2 min read

Talking Points for the Week That Was and the Week Ahead

Quote of the Week:
“Beating the competition is relatively easy. Beating yourself is a never-ending competition.” — Old Nike ad

Behavioral Spark

The labor market is weakening, inflation is sticky, and rate cuts are back in focus. It's tempting to time markets around these moves, but long-term success still depends on:

  • Staying invested (especially when news feels shaky)
  • Staying diversified (as different asset classes react differently)
  • Staying disciplined (trust your financial plan over the headlines)

Markets & Geopolitics

  • S&P 500 gained +2% in July; now +8% YTD
    • 3rd consecutive above-average month
  • Yields ticked up in July (10yr rose from 4.24% to 4.37%)
  • The Israel/Iran episode already feels like ancient history
  • U.S. trade deals (and tariffs) remain in focus—watch inflation impact in upcoming data

The Big Picture

  • The labor market cooled: July’s Nonfarm Payrolls came in weak (+73k vs. +110k est.) with steep downward revisions to May and June (-258k total).
  • Yet Q2 GDP surprised to the upside at +3.0% vs. +2.4% forecast, driven by a trade reversal (net exports boosted GDP after being a drag in Q1).
  • Markets are now pricing in 2–3 Fed rate cuts for the remainder of 2025 (up from just 9% chance of 3 cuts earlier in the week).

Labor Market Weakness

  • July NFP: +73k vs. +110k expected (lowest 6-mo average since Sept. 2020)
  • Unemployment rose to 4.2%; Participation Rate fell to 62.2%
  • 1.4 million people have left the labor force in the past 3 months
  • Without this drop, the jobless rate might be closer to 4.9%
  • ADP Payrolls surprised to the upside at +104k (vs. 75k est.), but small businesses—nearly 44% of total payrolls—remain soft
  • Core PCE (Fed’s preferred inflation gauge): +0.3% M/M, +2.8% Y/Y
  • Consumer Spending rebounded +0.34% M/M after a weak May
  • Personal Incomes also picked up
  • Goods prices rising faster than services, likely due to tariff effects
  • Inflation expectations are steady… for now

Economic Activity

  • Q2 GDP: +3.0%, up sharply from Q1’s -0.5%
    • Driven by a shift in trade dynamics (imports fell, exports rose)
    • Consumer Spending contributed nearly 1%
    • Final Sales jumped +6.3%, best since Q2 2021
  • Productivity is expected to get a lift from downward payroll revisions.

Federal Reserve Watch

  • Fed held rates steady, but Waller and Bowman dissented—first dual dissent since 1993
  • They wanted a 25 bps cut
  • Markets now see:
    • 42% chance of 2 cuts
    • 44% chance of 3 cuts
  • Trump amplified pressure on Powell post-NFP, calling for the Fed Board to "assume control" if Powell refuses to cut

Week Ahead: Key Data to Watch

  • Tue: Trade Balance, Services & Composite PMIs
  • Wed: Q2 Household Debt, Fed Governor Lisa Cook speaks
  • Thu: Productivity, Jobless Claims, New York Fed Inflation Expectations
  • Thu (global): Bank of England expected to cut; RBI to hold; China trade figures released

Final Thought
Economic data is noisy, markets are moody, and political pressure is rising—but the long-term path to wealth hasn’t changed: stay the course. We help investors navigate uncertainty not by predicting the next data point but by preparing for whatever comes.

Invest well, be well.
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