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WP Weekly insight (6/28 - 7/4)

WP Weekly insight (6/28 - 7/4)

July 25, 2025

Market Recap & Snapshot

  • The ICE US Dollar Index tumbled nearly 11% for the year through June, marking the greenback’s worst start to the year since 1973. While a weaker dollar acts as a tailwind for US exporters, it raises the price of imports for domestic businesses and consumers, which could potentially compound the anticipated inflationary effects of proposed tariffs.
  • Dollar weakness greatly contributed to international equities’ banner first half. European stocks outperformed their US peers by the widest margin on record (in dollar terms) in that timeframe, boosted by the euro’s 13% advance on USD. The MSCI All Country World Index closed at a record high to cap off the first six months, and Japan’s Nikkei 225 hit an 11-month high on June 30 on the back end of a five-session winning streak.
  • In spite of getting trounced by their international counterparts, the S&P 500 and Nasdaq Composite both closed the first half of 2025 at record highs and up more than 5% each year-to-date (YTD). The second quarter was an emotional rollercoaster for investors, to say the least. “Liberation Day” on April 2 led to a weeklong meltdown in the markets, with the S&P dropping over 11% from the start of the quarter to its April 8 low. The Trump administration’s subsequent announcement of a 90-day pause on its reciprocal tariff measures, in tandem with strong first-quarter corporate earnings, saw the index rebound by almost 25% by quarter-end, one of the fastest whipsaws on record. The Nasdaq had its biggest quarterly gain since COVID-riddled 2020. Stay. Invested.

  •       The whiplash-inducing snapback does, however, bring valuation concerns back to the forefront as we prepare second quarter earnings season. The S&P 500 now trades at roughly 23x forward earnings, a significant 35% premium to the 30-year average of 17.[4] What this tells WP is that stock market returns moving forward will be driven by corporate performance by way of earnings growth relative to expectations. Analysts polled by FactSet have become more cautious, lowering their 2025 earnings growth expectations to 9.4%, down from 14.3% predicted in January.[5]

One BIG “Beautiful” Bill

  •      The Senate passed its version of the $3.4 trillion tax-and-spending “megabill” on Tuesday, July 1, thanks to a tie-breaking vote from Vice President J.D. Vance following three GOP defections. Republican Senators maneuvered to pass the bill with a simple majority via the reconciliation process, which is filibuster-proof but forbids bills from increasing deficits beyond the 10-year budget window. The extension of the 2017 tax cuts was treated as costing nothing, since they are not new tax cuts but rather “current policy.” The fuzzy accounting assumption magically turned what amounts to a $3.4 trillion deficit increase that could not pass through reconciliation into a $508 billion deficit decrease that did. Feel free to read more about the “current law” vs. “current policy” baseline debate here.
  • GOP senators altered the bill approved by the House in May to make deeper cuts to safety-net programs—the Senate version’s shifts on Medicaid leave 12 million people without insurance by 2034, according to the Congressional Budget Office (CBO), compared with 11 million people in the House version.[6]
  • The Senate bill also expedites the elimination of clean energy tax breaks but removes an excise tax on clean energy products constructed with parts manufactured overseas, avoiding a worst-case scenario for wind and solar outfits.
  • The House Freedom Caucus, a unified bloc of conservatives within the lower chamber, decried the Senate bill’s much larger price tag—$3.4 trillion versus the House version’s $2.4 trillion—while representatives in rural districts expressed concern about the financial impact on hospitals that rely on Medicaid funding.
  • In the end, the GOP is Trump’s party, and House Republicans fell into line, passing the bill with a 218–214 tally on July 3 with only two R’s (and all Democrats) voting against. The bill is “going to make this country into a rocket ship, it’s really great,” President Trump proclaimed following the House vote.[7]He signed the bill into law in a 4th Fourth of July ceremony at the White House that included a B-2 stealth bomber flyover.
  • So what’s in the massive tax-and-spending bill, and what does its passage mean for your money?

Taxes

  • Permanently extends lower income tax rates from the 2017 TCJA for households earning <$405K.
  • Keeps corporate tax rate at 21%.
  • Doubles standard deduction and extends increased child tax credit.
  • Raises the estate tax exemption to $15M per person (indexed for inflation).
  • Introduces deductions for tips, OT pay, and car loan interest (through 2028).
  • Raises the SALT deduction cap from $10K to $40K (with phaseouts above $500K income).

Spending 

  • Medicaid and SNAP face major cuts. Medicaid now includes work requirements and stricter eligibility checks. SNAP cuts may reduce benefits for over 22M families.

  • Clean energy credits are phased out.

  • Adds $307B in defense and immigration spending (including funds for border wall and detention centers).

  •  Raises the debt ceiling by $5T, increasing long-term deficit pressures.

WP's Two Cents: Fiscal and Economic Impact

WP views OBBB as regressive, benefiting high earners while cutting aid to low-income groups. Yale economists estimate it will cost the poorest 20% of taxpayers $560/year while giving the top earners over $6,000 in annual benefits.

Despite masking its costs, the bill worsens long-term sustainability. With no new revenue to offset cuts, the U.S. risks growing debt, higher interest rates, and slower economic growth. The only way out may be AI-driven productivity or future tax hikes and entitlement reform.

The Fog of [Trade] War

UK Trade Deal

  • UK autos now face 10% tariffs, lower than 50% global standard.

  • U.S. gains access to UK markets for beef and ethanol.

  • UK steel/aluminum gets preferential rates.

Canada’s Digital Services Tax

  • Canada paused its tax plan targeting U.S. tech firms (Alphabet, Meta, Amazon) after Trump threatened to end trade talks.

  • A new US–Canada deal is expected by July 21.

Deal with Japan in Jeopardy

  • Tensions rise as Trump threatens 35% tariffs, citing unfair trade practices and refusal to import U.S. rice or agree to a car tariff deal.

Agreement with Vietnam

  • U.S. agreed to 20% tariffs (down from 46%) and 40% tariffs on goods with Chinese components.

  • Vietnam agreed to take in U.S. goods tariff-free.

  • U.S. export restrictions on high-tech goods may be eased.

  • Brands like Apple, Nike, and Lululemon benefit from tariff reprieve.

Economic Data

Labor Market

  • June jobs report: +147,000 jobs added (vs. 115K expected); unemployment fell to 4.1%.

  • Job openings rose to 7.8 million in May, with gains led by leisure/hospitality.

  • ADP private payrolls showed a surprise drop of 33,000 jobs—seen as an outlier.

  • Wage growth remained solid at 3.8% YoY.

  • Rate cut expectations pushed to September, as the labor market remains strong.

Eurozone Inflation

  • Germany’s inflation hit 2%, the ECB’s target, signaling an end to rate cuts.

  • Eurozone-wide inflation slightly rose to 2% from 1.9%.

Central Bank Watch

Fed Chair Jay Powell, speaking at the ECB’s central banking forum, stressed a data-dependent approach to future rate decisions. He defended the Fed’s current pause, noting that Trump’s tariffs have raised inflation forecasts. ECB President Lagarde publicly supported Powell, earning applause.

Meanwhile, Fed critic William Pulte blasted Powell over the $2.5B cost of renovating the Eccles Building. Trump has called for Powell to resign, though no wrongdoing has been proven.

Corporate Earnings & Stocks in the News

  • Apple may use OpenAI or Anthropic’s AI for a new Siri, raising concerns over Apple’s own innovation.

  • Oracle signed a $30B/yr deal to provide cloud infrastructure to OpenAI.

  • Tesla’s deliveries fell 13%, its worst-ever quarter. EU sales plummeted 37%, and China sales likely dropped 10%, hurt by trade tensions and loss of EV tax credits from OBBB.

The Week Ahead

  • Ukraine: No progress on peace talks; Russia launched over 500 drones/missiles at Kyiv.

  • TACO Tuesday (July 9): Deadline for countries to reach trade deals to avoid reinstated U.S. tariffs.

  • FOMC minutes and Netanyahu-Trump White House meeting to dominate the week.

ECONOMIC AND INDEX DEFINITIONS

Disclosure: Osaic Wealth, Inc. and its representatives do not provide legal or tax advice. You should consult a legal or tax advisor regarding any legal or tax information as it relates to your personal circumstances. There is no guarantee that adiversified portfolio will outperform a non-diversified portfolio in any given market environment. No investment strategy, such as asset allocation, can guarantee a profit or protect against loss in periods of declining values. In general, bond market is volatile, bond prices rise when interest rates fall and vice versa. This effect is usually pronounced for longerterm securities. Any fixed income security sold or redeemed prior to maturity may be subject to a substantial gain or loss. The price of commodities is subject to substantial price fluctuations of short periods of time and may be affected by unpredictable international monetary and political policies. The market for commodities is widely unregulated and concentrated investing may lead to higher price volatility. Periodic investment plans do not assure a profit or protect against a loss in declining markets. Such plans involve continuous investment in securities regardless of fluctuating price levels. Investors should consider their financial ability to continue purchases through periods of low-price levels. ixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors. Investing in securities involves risk, including the potential loss of principal invested. The investor should note that funds that invest in lower-rated debt securities (commonly referred to as junk bonds) involve additional risks because of the lower credit quality of the securities in the portfolio. The investor should be aware of the possible higher level of volatility, and increased risk of default. Foreign investments involve special risks including greater economic, political, and currency fluctuation risks, which may be even greater in emerging markets. — International investing involves special risks such as currency fluctuation and political instability. Indexes are unmanaged and investors are not able to invest directly into any index. — Indexes cannot be invested in directly, are unmanaged and do not incur management fees, costs, or expenses. Past performance is not a guarantee of future results. Sector investing may involve a greater degree of risk than investments with broader diversification. Investors should be aware that investing based upon strategies or models does not assure a profit or guarantee against loss. Technical analysis is based on the study of historical price movements and past trend patterns. There is no assurance that these movements or trends can or will be duplicated in the near future. Past performance is no guarantee of future results. Conclusions expressed are personal opinions; and should not be construed as specific recommendations. Indexes cannot be invested in directly, are unmanaged and do not incur management fees, costs, and expenses. Osaic Wealth is separately owned and other entities and/or marketing names, products or services referenced here are independent of Osaic Wealth.Disclaimer: This newsletter and its contents are for the personal use of the intended recipient only. Any redistribution,reproduction, or sharing of this material, whether in part or in whole, for commercial purposes or any use beyond personal reference, is strictly prohibited without prior written consent. Unauthorized use of the content may result in legal action. Please respect these terms and ensure the integrity of this communication remains intact.

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