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RoboStreet – July 31, 2025
The S&P 500 and Nasdaq surged to fresh all-time highs this week, fueled by blockbuster tech earnings and steady economic growth. But make no mistake—beneath the euphoria, Jerome Powell just issued one of the most delicately worded warning bells of the year.
On the surface, it was a week tailor-made for bulls. Microsoft and Meta crushed expectations, pushing the Nasdaq 100 futures up over 1.3% after Wednesday’s close. The PCE inflation report—a key gauge for the Fed—came in just a hair above estimates, at 2.8% annually for core and 2.6% for headline. Yet the market’s reaction wasn’t exactly straightforward.
Why? Because the Fed didn’t play along.
And remember, we’re not talking about day trading here. I’m looking for 50-100% gains within the next 3 months, so my weekly updates are timely enough for you to act.
At its July meeting, the Federal Reserve held interest rates steady, as expected. But Powell’s tone in the follow-up press conference was notably cautious—even skeptical. Gone was the gentle guidance or suggestion of a September rate cut. Instead, Powell reminded investors that no decisions have been made, and that more data—two inflation reports and two job reports—will guide the Fed’s thinking between now and the next FOMC meeting on September 17.
That was enough to shake the foundation of dovish bets. The CME FedWatch tool showed September rate cut odds plunge from 63% to 45% in a single day. Treasury yields initially jumped, with the 10-year flirting with 4.5%, before falling back to 4.34% as markets tried to digest the mixed signals. Stocks gave up early gains, with the S&P 500 closing down 0.1% and the Dow off 172 points.
Inflation: Still Sticky, Still Stubborn
Powell and company remain laser-focused on inflation, which, while cooling from its peaks, remains stubbornly above the Fed’s 2% target. Core PCE—the central bank’s preferred inflation gauge—rose 0.3% in June and 2.8% year-over-year, slightly above expectations. While not a dramatic beat, it complicates the Fed’s ability to justify cuts in the near term.
Powell also acknowledged that President Trump’s new wave of global tariffs—ranging from 15% to 20%—are starting to affect prices in some categories. However, he described these as “likely one-time” effects that the Fed will monitor but not overreact to… yet. “We will, through our tools, make sure this does not move from being a one-time price increase to serious inflation,” he said.
The situation puts the Fed in a bind: cut too early, and risk reigniting inflation. Wait too long, and risk damaging an already-softening labor market.
Labor Market & Growth Outlook
The labor market, while still strong by historical standards, is losing momentum. Weekly jobless claims ticked slightly higher to 218,000, and unemployment now stands at 4.1%. That’s not yet a red flag, but it’s a clear deceleration from earlier in the year.
Meanwhile, Q2 GDP surprised to the upside, coming in at a 3.0% annualized rate, reversing a 0.5% contraction in Q1. The rebound was driven in part by trade flow distortions, as businesses initially overstocked to avoid tariff shocks earlier this year, only to draw down inventories in Q2. Despite the positive print, economists note that this doesn’t necessarily indicate sustained acceleration—especially if tariffs continue to disrupt global supply chains.
No August Fed Meeting—but Jackson Hole Looms
Importantly, there’s no Fed policy meeting in August. That means all eyes now turn to Jackson Hole on August 22, where Powell will speak at the annual Economic Symposium. Traditionally, Jackson Hole has been used as a soft launchpad for major policy shifts—or at least a readout of the Fed’s internal debate.
Given the current backdrop—modestly restrictive rates, mixed economic data, and political pressure to ease—the speech could carry outsized weight. Investors hoping for a September rate cut may find themselves reading between every line of Powell’s remarks, especially with the September FOMC meeting just days after (Sept. 16–17).
Politics, Tariffs, and the Global Chessboard
Markets also had to absorb a flurry of geopolitical and trade news this week. Trump’s aggressive new tariff plans rattled global markets, particularly after Canada announced it would formally recognize a Palestinian state—prompting Trump to threaten the breakdown of U.S.-Canada trade talks. Meanwhile, Treasury Secretary Scott Bessent tried to calm nerves, stating that a deal with China was close, though “not 100% done.”
One area where tariffs are already having a tangible impact is copper. After the U.S. unexpectedly exempted refined copper from its 50% tariff list, prices fell sharply. Refined copper, which supplies 50% of domestic U.S. demand, was spared—alleviating cost pressure on industries from construction to tech.
Outlook: Markets at the Crossroads
So where does that leave us? The S&P 500 has rallied over 15% year-to-date. The VIX remains near 15, suggesting investor complacency—or perhaps confidence—in the face of mixed signals. At Tradespoon, our AI-driven models see SPY’s rally pushing into the $630–$640 zone, but caution is warranted. Support sits at $580–$590, and the risk of sideways consolidation remains high. For reference, the SPY Seasonal Chart is shown below:
Despite the euphoria in mega-cap tech, this market is not as stable as it seems. The rate policy remains unresolved. Inflation is easing, but not fast enough. And tariffs are creeping back into the narrative in ways that could eventually hit margins and sentiment.
Yes, earnings remain strong. Yes, GDP rebounded. But the Federal Reserve isn’t ready to declare victory on inflation—and Chair Powell made that abundantly clear this week. Despite new market highs, investors should be cautious about getting too comfortable. With Jackson Hole around the corner and the September FOMC meeting on the horizon, the summer rally could quickly give way to an autumn reality check.
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As we progress through Q3 2025, investors face a challenging market environment shaped by renewed tariff threats, shifting Federal Reserve policies, mixed economic signals, and heightened geopolitical uncertainties, including escalating global trade disputes. Amid this ongoing volatility, aligning with a reliable and insightful investment partner is more critical than ever for navigating the complexities and positioning effectively in this dynamic market landscape.
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And remember, we’re not talking about day trading here. I’m looking for 50-100% gains within the next 3 months, so my weekly updates are timely enough for you to act.
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