I don’t think anyone’s head actually exploded, but there was a lot of information for markets to digest this week.
Coming into the week, US corporate earnings for the 2nd quarter have been better than expected.
“For Q2 2025 (with 34% of S&P 500 companies reporting actual results), 80% of S&P 500 companies have reported a positive EPS surprise and 80% of S&P 500 companies have reported a positive revenue surprise.”
https://www.factset.com/earningsinsight
However, it appears good earnings were already priced into the market and stock prices remain historically high. The forward 12-month P/E ratio for the S&P 500 is 22.4. This P/E ratio is above the 5-year average (19.9) and above the 10-year average (18.4).
The US economy grew at an annualized rate of 3.0 percent in the second quarter of 2025, according to the Bureau of Economic Analysis (BEA). This growth reversed a -0.5% decline in the first quarter. The increase was primarily driven by a decrease in imports and increased consumer spending.
President Trump’s August 1st deadline for tariffs has arrived and an “agreement” has been struck between the US and Europe.
Some are happy with the deal, but some are not. The BBC described it this way –
“Many across Europe breathed a sigh of relief that European negotiators had avoided 30% tariffs threatened by Trump months ago. Other countries are still racing to finalize deals with the US to avoid sweeping levies. Few European leaders rejoiced at the announcement that a 15% tariff would be applied on most EU exports to the US – an improvement on the 30% tariff initially threatened by Trump, but still a substantial hike from the former 4.8% average rate.”
https://www.bbc.com/news/articles/cvgp5q4x4nzo
Many non-European countries will still face tariff rates higher than 15%.
But the biggest news for the week was the July jobs report released Friday morning. The US economy created just 73,000 jobs versus forecasts of 100,000. While this was certainly unwelcomed news, the real surprises were the downward adjustments made to the previously-announced May and June numbers.
May job creation – previously stated: 125,000 updated: 19,000
June job creation – previously stated: 147,000 updated: 14,000
https://www.cnbc.com/2025/08/01/jobs-report-july-2025.html
The unemployment rate rose from 4.1% to 4.2% as predicted. While this report certainly shows a weakening job market, it is far from a WEAK job market with unemployment so low.
Why were the May and June numbers so far off? First of all, counting net new jobs is very difficult and has become even more so since COVID. Traditional employment has changed with the rise of the “gig economy” (the gig economy is a labor market characterized by short-term, temporary, or freelance jobs filled by independent contractors). But more recently, government cost-cutting measures has made it more difficult for the Bureau of Labor Statistics to be as accurate as they would like to be. I heard one economist describe it as a pilot flying a plane using only 2/3 of the instruments he previously had available.
The Fed met this week and left interest rates unchanged as expected.
I attended a reception this week for Jamie Dimon, CEO and Chairman of the Board for JP Morgan Chase, as he was visiting Atlanta. With all the positive and negative news swirling about recently, he was asked what his outlook was for the near-term. He responded with the question, “Have you ever ridden a wild bronco? Buckle up!” Then he said he was more positive than he was a few months ago, and that people consistently underestimate the resiliency of the US economy.
Have a great weekend.
Jack C. Harmon II, CFP®, CIMA
Principal, Harmon Financial Advisors
Registered Principal, Raymond James Financial Services
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