GoalVest Advisory
August Update
Markets Continued to Rally in July, Led by Tariff Hopes
Equity markets moved higher for the third consecutive month in July, supported by expectations of more manageable tariff levels. Through July 27th, the S&P 500 rose 3.1%, the Nasdaq gained 3.0%, and the Dow Jones Industrial Average was up 1.8%. Small-cap stocks, as measured by the Russell 2000 Index, ended the month with a 3.9% gain.
Year-to-date through July 28th, the S&P 500 was up 9.4%, the Nasdaq was up 11.4% and the Dow Jones Industrials Average was up 6.2%. Small-cap stocks also turned positive for the year, returning 1.9%.
The CBOE Volatility Index (VIX) closed at 15.0 on July 28th, significantly lower than its April 7th intraday high of 60.1. This is well below the 20.0 level generally considered stable and has been trending downward for several months. Investor concerns around inflation and tariffs have eased, although valuation concerns are beginning to emerge and may become clearer as second-quarter earnings are released.
Fixed Income Markets
Fixed income markets remain positive after a sluggish start to the year. The Bloomberg U.S. Aggregate Bond Index was up 3.5% year-to-date as of July 28th, outperforming last year’s 1.3% return. However, the month-over-month return was down by 0.57% in July.
Economic Data
The Bureau of Labor Statistics (BLS) released the June CPI report on July 15th, reporting annual CPI at 2.7%, up from May’s 2.4%. The month-over-month increase is at least partly attributable to tariffs and rising utility costs.
The Federal Reserve is expected to hold rates steady in July, with a potential rate cut on the table for September if conditions warrant. Meanwhile, the economy has continued to perform well despite Fed rates between 4.25% and 4.5%.
The BLS also reported employment figures on July 3rd. There were 147,000 new jobs added in June as compared to 139,000 new jobs added in May. Additionally, the unemployment rate declined slightly in June to 4.1%. These numbers suggest a labor market strong enough to support continued GDP growth.
Tariffs in Focus
Tariffs were a key market driver in July. On July 23rd, the U.S. announced a 15% tariff on Japanese imports, including automobiles. This was followed by a similar 15% agreement with the European Union on July 28th. Markets welcomed these lower-than-expected rates, which had previously been proposed at 25% or higher. While the 15% rate may pose some economic headwinds and modest inflationary pressure, it is widely seen as manageable.
Tariff discussions with Canada and Mexico, the U.S.’s two largest trading partners, remain unresolved. Markets are hopeful that moderate agreements will be reached, however.
We continue to focus on opportunities in resilient sectors and companies. As always, staying diversified, maintaining some level of liquidity, and being prepared to adjust portfolios remain our key strategies for navigating volatility.
In Summary
We believe equity markets have room to perform well in the second half of 2025, supported primarily by corporate earnings. Current market valuations stand at 22.4 times forward earnings. This is up slightly from the start of the year, and we anticipate continued strength in U.S. companies, as they are largely well-managed, profitable, and innovative. Additionally, current tariff levels appear manageable and are not weighing heavily on market sentiment.
Volatility is currently low, but it could reemerge if inflation accelerates or earnings fall short of expectations. We plan to capitalize on potential volatility by being correctly positioned. Investment opportunities exist across a wide range of asset classes, including private equity, private credit, venture growth, tech innovation, and dividend-paying companies.
We are encouraged by the recovery since April’s market bottom, the moderation in tariff levels, the containment of the broader Middle East conflict in June, and the current low levels of volatility.
Sevasti Balafas, CFA, CPWA®
CEO & Founder
GoalVest Advisory
Sources: JP Morgan Asset Management, Bureau of Economic Analysis, Bureau of Labor Statistics, Morningstar, Factset, Barron’s, KKR, and YCharts |
