The S&P 500 stock market index reached ten new record highs in July. This happened because companies reported strong earnings (profits), the economy showed it was doing well, and new trade agreements were made before the tariff deadline. The S&P 500 had six straight days of record closes in the second half of the month. For the year so far, the S&P 500 is up 7.8%.
But at the end of July, markets became uncertain again. On July 31, new tariff rates were announced, which could mean higher prices for everyday items that people buy. Also, the July jobs report showed that fewer people got jobs over the past three months than we thought before.
During times like this, it’s important for people who invest money to stay calm as markets react to trade news and economic information. The past few months show us that things can change quickly, so thinking about long-term goals is still the best approach for building wealth.
Important Market and Economic Information
- The S&P 500 went up 2.2% in July, the Dow Jones Industrial Average went up 0.1%, and the Nasdaq went up 3.7%. For the whole year so far, the S&P 500 is up 7.8%, the Dow is up 3.7%, and the Nasdaq is up 9.4%.
- The Bloomberg U.S. Aggregate Bond Index (which tracks bonds) went down 0.3% in July. The 10-year Treasury yield (the interest rate on government bonds) rose a little to end the month at 4.38%.
- International stocks had mixed results. The MSCI EAFE index (developed countries) fell 1.5% and the MSCI EM index (emerging markets) gained 1.7%.
- GDP (which measures how much the economy grew) increased at a rate of 3.0% in the second quarter. This was mainly because businesses started investing more and import activity changed due to tariffs.
- The U.S. dollar index went up from 96.88 at the end of June to 99.97 at the end of July. But it’s still down a lot this year.
- Bitcoin reached a record high of $120,198 in the middle of the month before ending July at $116,491.
- The price of gold stayed strong but is below its recent high, ending the month at $3,293.
- Copper prices jumped to record levels because of targeted tariffs, but then had its biggest single-day drop of 22%.
- The Consumer Price Index (which measures inflation or rising prices) went up 2.7% compared to a year ago in June. This matched what economists expected.
- The economy only added 73,000 jobs in July. Big changes to the May and June numbers mean the economy was much weaker than first reported. The unemployment rate stayed low at 4.2%.
Stock markets hit new record highs
The second quarter earnings season that started in July continues to show companies doing better than expected, which pushed stock prices higher. While many companies reported some effects from tariffs, the results weren’t always bad. With over a third of S&P 500 companies reporting their earnings, 80% did better than expected with their earnings-per-share (how much profit each share of stock made). The combined earnings growth rate is now 6.4% per year. This is lower than recent quarters but higher than what Wall Street analysts thought it would be.1
Excitement about artificial intelligence helped several Magnificent 7 stocks (the seven biggest tech companies). Both Microsoft and Meta reported better-than-expected earnings while making big investments in AI technology. Because of this, Microsoft joined NVIDIA as the second company ever with a market value of over $4 trillion. Meanwhile, Tesla reported disappointing results for the second quarter, which hurt its stock price.
While tech stocks have had ups and downs so far in 2025, the Information Technology sector is up over 13% for the year. Only the Industrials sector has done better with returns over 15% so far in 2025. Meanwhile, Health Care and Consumer Discretionary stocks (companies that sell things people want but don’t need) have done poorly and are losing money.
In the bond market, it was a quiet month with bonds falling slightly overall. The Fed (Federal Reserve, which sets interest rates) kept rates the same at 4.25% to 4.50% for the fifth meeting in a row. They’re trying to balance concerns about rising prices from tariffs with economic growth. However, for the first time since 1993, two Fed governors voted against this decision because they wanted to cut rates by a quarter point. This follows ongoing disagreement between President Trump and Fed Chair Powell as the White House keeps asking the Fed to lower interest rates.
New information after the meeting showed that hiring got weaker in July, with only 73,000 jobs added during the month. Previous reports were changed to show lower numbers, meaning there were 258,000 fewer jobs added in May and June than originally reported. The three-month average is now only 35,000 new jobs per month, much lower than the historic average. This suggests the Fed may have to focus more on keeping people employed, making it more likely they’ll cut interest rates, possibly starting in September.
Investors wait for new trade deals and tariff announcements
The White House announced several new trade deals throughout July, including with the European Union, Japan, and South Korea. Trade talks with China are still happening. These deals avoid the worst-case scenario that many investors feared in April, but many other countries may still face higher tariff rates as the deadline to negotiate runs out. On July 31, President Trump signed an executive order with new tariff rates for many trading partners. These rates will start on August 7 (the previous tariff deadline was August 1), as shown in the chart above.
As of July 23, the Yale Budget Lab estimates that consumers face an overall effective tariff rate of 20.2%, the highest since 1911. So far, it looks like companies have managed to absorb much of this extra cost instead of passing it on to consumers through higher prices. Whether this continues depends on where tariffs end up and how companies manage to adapt.
The government passed major laws on taxes and cryptocurrencies
Bitcoin reached new highs in July as Congress considered new laws to regulate cryptocurrencies (digital money like Bitcoin). The administration’s friendly attitude toward wider use of cryptocurrencies has helped Bitcoin go up in value in 2025. Separately, the GENIUS Act, which has been signed into law, focuses on stablecoins, which are digital currencies often tied to the U.S. dollar.
On July 4, President Trump signed a comprehensive tax and spending bill that made many parts of the Tax Cuts and Jobs Act permanent, including current tax rates and income brackets. The bill gives investors more certainty by keeping the current low-tax environment, but also raises concerns about whether the growing national debt is sustainable.
The Congressional Budget Office estimates the bill will add over $3 trillion to the national debt over the next decade. While there were spending cuts to major programs in the bill, they were more than offset by reductions in tax revenue.
Making many of these tax changes permanent removes uncertainty that has affected long-term financial planning, since many parts of the TCJA were scheduled to expire this year. This could help support business investment and consumer spending in the near term.
The bottom line? The stock market reached many new highs during a busy month filled with tariff changes, a new tax bill, and company earnings reports. As we move into August, trade deals and earnings will likely remain important for investors to watch.
1.https://advantage.factset.com/hubfs/Website/Resources%20Section/Research%20Desk/Earnings%20Insight/EarningsInsight_072525.pdf