Last Week
There were fireworks on Wall Street as the stock market rocketed to a record close ahead of the July 4 Independence Day weekend. The positive sentiment came from an improved tariff tango tempo and a surprisingly strong June jobs report.
The first positive tariff twist came on Sunday when Canada scrapped its 3% digital services tax on technology companies. That set the stage for Canadian Prime Minister Mark Carney and U.S. President Donald Trump to try to hammer out a deal by July 21 to govern the two countries’ trade relationship, which saw them exchange more than $900 billion in goods and services last year. President Trump announced a trade deal with Vietnam on Wednesday, driving the S&P to another high. Traders seemed unconcerned that the President has said he will not extend the pause on reciprocal tariffs with other trading partners, which was set to expire on July 9 before being extended to August 1. We recommend that investors remember the carnage following “Liberation Day” and proceed cautiously.
On Thursday, the Bureau of Labor Statistics said that the U.S. added 147,000 jobs in June, exceeding economists’ expectations. The government report stands in sharp contrast to the ADP private payrolls number and other labor market indicators.
Another major development, viewed positively by the market but with unknown consequences, was the passage of Trump’s 1000-page “One Big Beautiful Bill Act” in both the House and the Senate. The ceasefire between Israel and Iran seemed to hold, further emboldening traders. By the market close before the holiday weekend, the S&P 500 and Nasdaq Composite reached new record highs, gaining 1.6% and 1.7% respectively. Small caps were the biggest winners, as the Russell 2000 jumped 3.5% although still approximately 10% below the November 2024 high. We believe interest rate cuts later in 2025 could spur a further rally in small caps. Every industry sector finished in the green, while advancing issues more than quadrupled declining issues. The yield on the 10-year Treasury inched up 7 basis points to 4.35% as the bond market remained stable.
On the Chicago Sports Scene, the White Sox and the Sky keep losing, and the Cubs keep winning. The Cubs set a record by hitting 8 home runs in a game against the St. Louis Cardinals at Wrigley Field on July 4th.
This Week
Trade negotiations will be in focus as President Trump confirmed an August 1 deadline for trade deals with more than a dozen countries. There are more than 100 nations that could face the implementation of stiff tariffs.
Also, on Wednesday, the FOMC will release the minutes from its mid-June monetary policy meeting. There are unlikely to be any surprises.
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