Macroeconomic Outlook and Key Economic Indicators 

July 2025 was marked by a complex macroeconomic environment in the United States, characterized by a deceleration in growth alongside persistent inflationary pressures, amid evolving trade and policy developments. Real GDP growth was expected to rebound strongly in Q2 after a modest contraction in Q1, with the median forecast around 2.3% annualized growth, signalling a positive turnaround in economic activity. This recovery was supported by renewed capital expenditures following the passage of the “One Big Beautiful Bill,” which extended key fiscal provisions and aimed to reduce near-term policy uncertainty.

However, despite this GDP rebound, overall economic momentum has softened compared to prior years. The economy is navigating numerous crosscurrents, including rising tariff-related cost pressures effective August 1, elevated interest rates, and challenges in business investment and household consumption. These factors are leading to a slowdown in activity growth especially affecting lower- and middle-income households and smaller businesses. The economic expansion is increasingly dependent on large corporations and affluent consumers, a composition that analysts view as more fragile going forward. Consequently, real GDP growth is projected to slow to about 0.8% year-over-year by Q4 2025.

Inflation trends in July showed signs of moderation in core components such as housing and non-energy services, although energy prices remained volatile and elevated. The consumer price index (CPI) displayed stable-to-lower readings relative to prior months, easing some inflation concerns. Labor markets remained tight, with unemployment steady at historically low levels near 4.0%, and payroll job creation continuing to be solid, especially in the second quarter. Yet, employment gains have been uneven, with private sector hiring subdued relative to expansion norms and layoffs remaining low, reflecting cautious business sentiment given ongoing policy uncertainties that are now gradually easing. These has led the fed to keep the rates steady as however there are expectations that there will be one more rate cuts this is year. 

US Equities

The US stock market posted another month of strong gains despite some late volatility tied to renewed tariff threats and international trade uncertainty. Early in July, both the S&P 500 and Nasdaq Composite achieved several all-time highs, supported by robust earnings from major technology firms such as Microsoft and Meta Platforms. These companies far exceeded quarterly expectations, driven largely by continued investments and growth in artificial intelligence, which served as a key driver for broad technology sector outperformance.

By month end, the S&P 500 closed up approximately 2.3%, while the Nasdaq Composite gained 3.7% for July, marking its fourth consecutive month of gains. The Dow Jones Industrial Average was nearly flat for the month, reflecting relative weakness in value-oriented sectors compared to high-growth technology stocks. The late-July introduction of new tariffs and the anticipation of further trade agreements by the US administration created some headwinds and a modest pullback, but the overall tone remained optimistic as earnings season confirmed ongoing corporate strength.

Fixed Income

US Treasury yields retreated modestly in July, with the 10-year Treasury note yield falling from about 4.41% to 4.35% by month end. Fixed income markets saw continued demand, especially as the Federal Reserve held interest rates steady, but reaffirmed a cautious approach to monetary easing given persistent inflation concerns. Credit markets performed well, as tighter spreads reflected declining fears around corporate fundamentals and ongoing global demand for US debt as a safe haven.

Crypto Assets

Cryptocurrency markets experienced significant moves. Bitcoin crossed the $120,000 milestone during July, driven by investor expectations of imminent, clear regulatory frameworks from US Congress. The ongoing influx of institutional capital and the anticipated legislative environment led to renewed optimism and new all-time highs across the sector. Ethereum and other major coins participated, with overall crypto market capitalization reaching record levels.

Commodities

Commodity markets saw broad but uneven gains.

• Energy prices rose as West Texas Intermediate (WTI) crude ended the month just above $69 per barrel, reflecting tightened inventories in the US and positive demand trends globally.
• Gold prices edged higher, finishing around $2,085 per ounce. Easing real US yields and sporadic geopolitical risks boosted safe-haven demand.
• Agricultural markets were mixed, with volatility tied to updated US crop outlooks, while supply-side disruptions pushed sugar and select soft commodities higher.

International Markets

Europe

European equities continued to outperform on a year-to-date basis, with the Euro STOXX 50 finishing July up over 3%. This performance was buoyed by optimism over easing policy from the European Central Bank, robust corporate results (notably in utilities and defense), and broader improvement in economic sentiment. New US-imposed tariffs on European goods at mid-month created uncertainty, but markets ultimately looked past immediate trade headwinds.

Japan

Japanese equities held a positive trajectory, with the Nikkei 225 index up nearly 2.8% for July. Positive foreign inflows, earnings recovery, and measured guidance from the Bank of Japan underpinned market stability, even as investors watched for signals of gradual policy normalization.

India

India was an exception to the global rally. Its equity indices edged down slightly—about 0.35%—after new, sweeping US tariffs prompted a swift rotation out of export-oriented sectors and into more domestically focused consumer stocks. Market sentiment remained cautious heading into August, with bond and currency markets relatively stable but sensitive to further developments in global trade and US policy.

Thematic Highlights

The “Magnificent Seven” US tech stocks, led by Microsoft and Meta Platforms, continued to drive much of the market’s upside, with strong AI-fueled earnings results pivotal for investor confidence.

The Federal Reserve’s continued pause reinforced hopes for future rate relief, contributing to demand for both US equities and fixed income, even as lingering inflation kept central bank messaging cautious.

Global volatility remained low; the VIX index fell to multi-month lows, pointing to sustained risk appetite despite identifiable global macro risks.

Commodity-linked equities and emerging market currencies benefited from a late-month softening in the US dollar.