Clearview Portfolio Consulting July 2025 Recap

Key Points:

• The U.S. economy grew at an annual rate of 3% in the second quarter, following a 0.5% contraction in Q1.
• Stocks rose during the month despite a weakening economic backdrop.
• Bonds narrowly dipped in July, but a rate cut in the second half of this year could boost prices of high-quality fixed income.

The US economy rebounded in the second quarter with GDP growing 3%. When coupled with the 0.5% decline in the first quarter, the 1.25% annualized growth rate for the first half of this year is below the 2% trend the US economy has averaged over the past 20 years. The economy seems to be slowing and there are many factors at play. The Federal Reserve is still in restrictive mode as inflation has failed to fall to its 2% target. However, prospects are rising for a rate cut at their next meeting in September. Tariffs and trade deals saw a flurry of new activity this month and continue to evolve. This year has seen a cloud of uncertainty about trade and future global economic growth. We saw an underwhelming US jobs report and rather large negative revisions to previous payroll reports, which suggests a weaker labor market than previously indicated. The unemployment rate ticked up to 4.2%. Despite the uncertainty around softer economic data, US equities moved higher for the month fueled by the largest growth stocks.

The NASDAQ Composite gained 3.7% in July, followed by the S&P500’s 2.2% and the Dow Jones Industrial Average’s 0.2% gain. Technology (+5.2%) was the leading sector of the market followed by utilities (+4.9%) and industrials (+3%). Data centers and how they will be constructed, powered and cooled, are drawing investor demand across these industries. Strong earnings from the largest companies in the US, and the artificial intelligence build-out continues to attract capital flows in the face of slowing economic conditions. Healthcare stocks, down 3.3% in July, continue to lag the market this year. Drug manufacturers and insurance providers have been hit by rising medical costs and regulatory pricing pressures.

Fixed income markets were mixed for the month. The Bloomberg US Aggregate Bond Index fell 0.26%, but positive returns were seen in investment grade corporates, high yield and inflation protected bonds. With money market yields in excess of 4% and above the inflation rate, asset levels have increased to over $7T. A Fed rate cut (or cuts) in the second half of this year will likely bring those yields down and make sitting in cash less attractive. However, high valuations in the stock market may keep investors on the sidelines awaiting better entry points.