Weekly Market Update: July 14, 2025

The June employment report exceeded expectations. Indeed, the nation added an estimated 147,000 jobs last month, easily surpassing the consensus forecast of 110,000 and up modestly from the estimated 144,000 jobs created in May. The sanguine report also included a drop in the unemployment rate, from 4.2% to 4.1%. In addition, the Job Openings and Labor Turnover Survey (JOLTS) showed an increase in the number of job openings last month, which alleviated some concerns about a slackening labor market. 

The labor figures further reduce the possibility of an interest-rate cut at the July Federal Open Market Committee (FOMC) meeting. That, along with the slight increase in the Personal Consumption Expenditures (PCE) Price Index in May and the Federal Reserve’s concern about the impact of tariffs on the pace of price growth, likely pushes a rate reduction to at least the September FOMC meeting. Between the next two meetings, the Federal Reserve will hold its annual Jackson Hole Economic Policy Symposium in late August. 

Wall Street is still forecasting one or two reductions to the federal funds rate this year. The short-term benchmark interest rate, currently at 4.25% to 4.50%, is widely considered to be restrictive. Thus, with uncertainty about the impact on growth of the tempestuous global trade policies, we think the central bank will begin to bring the federal funds rate closer to the longer-run neutral rate, which is around 3.00%. 

Meanwhile, President Trump signed a comprehensive tax-and-policy bill into law on Independence Day. The legislation, which is estimated to add more than $3 trillion to the federal deficit over the next decade, also increases the ceiling on the national debt by $5 trillion. In the near term, the clarity of having a budget deal, along with rollbacks in financial and energy regulations, could potentially boost economic growth in the second half of this year.

Conclusion: With the market still weighing the impact of a number of factors, including the new budget deal, tariffs, and the Federal Reserve’s next monetary policy move, some volatility in the months ahead can’t be ruled out. Given this backdrop, investors should maintain a diversified portfolio, led by high-quality, large-cap stocks. 

Source: ValueLine.com