Market View: July-August 2025

By Argent Wealth Management, LLC on July 25, 2025

Summary

• The Bull Market is likely to continue.
  • Technical indicators imply there is more room for gains.
  • Investors expect Trump to continue a selective tariff rollout. 
  • Recession risk is low.
  • The Federal Reserve is in an easing cycle.
  • Fiscal policy is stimulative. 

• However, a 5-7% type of correction before year-end would not be surprising.
  • Many stock indices are up over 20% since their April lows.
  • Sentiment is optimistic.

Technical Indicators

The April Market View dated April 15 noted that “the stock market is a forward indicator…during market volatility there are (breadth thrust) signals to look for when assessing when the right time to get more aggressive is…there will be opportunities born from this volatility.” 

The May Market View dated May 2 noted: “stock markets have historically been reliable forward indicators…the (breadth thrust) indicators suggest…that it is more likely than not the worst of the correction is behind us…it is starting to look like we are on step 4”.  Step 4 meaning a new bull market.

The average return of the S&P 500 a year after 5 or more Ned Davis Research (NDR) breadth thrust indicators are triggered is 21.52%. 

Five or more were triggered on May 5, as was highlighted in the June Market View titled “Expect the Bull Market to Continue.”

Since May 5, the S&P 500 is up just over 11%, implying the bull market still has room to run.

What Happened, and What to Expect

The initial sell-off was triggered by fears of sweeping tariffs, but Trump’s 90-day tariff pause on April 9 sparked a historic rally.  This was followed by gains in May and June as trade talk optimism and solid economic fundamentals took hold. 

Going forward, market performance remains sensitive to trade policy, economic data, inflation, and Federal Reserve actions. 

Trade Policy

Investors expect Trump to continue a selective tariff rollout, a far cry from the blanket tariffs he announced on April 2 that triggered a precipitous drop in markets.  Trump’s actions imply a full-scale trade war is unlikely, as that would disrupt global supply chains and potentially inflate consumer prices.  With the 2026 mid-terms approaching, Trump is more likely to implement voter-friendly policies and avoid any policies that may alienate consumers. 

However, Trump is using tariffs as a negotiating tool.  Trump may view a sharp run-up in markets as leverage to negotiate. In addition, sentiment is optimistic, meaning a lot of good news is already priced in.  Therefore, a 5-7% type correction would not be surprising.

Economic Data

Rather than review a myriad of specific charts, investors can look at NDR’s Global Recession Probability Model.  This incorporates composite leading indicators created by OECD (Organization for Economic Cooperation and Development) for 35 countries.  It implies recession risk remains low.  When this indicator is below 30, the MSCI All Cap World Index goes up by 10.69% per annum on average since 1987. 

The Federal Reserve

The Consumer Price Index (CPI), partly due to the impact of tariffs, increased slightly in July.  Although it mostly remains on a downward trajectory, it does call into question investors’ expectations for 1-2 rate cuts by year-end.

However, whether the Federal Reserve cuts the Federal Funds rate two times or zero by year-end, they are highly unlikely to increase rates. 

It is clear we are in an easing cycle.  This is supportive of stock prices.  If the economy does better than expected, the Fed may not cut rates in 2025, but the economy would support earnings growth and stock prices.  If the economy does worse than expected, the Fed may cut two times in 2025, and this would lower interest rates thus stimulating economic growth.  Loans for consumers and businesses would cost less and this would incentivize consumers and businesses to invest and spend more.

Fiscal Policy

The “Big Beautiful Bill” is also expected to be stimulative. It includes:

• An extension of the 2017 TCJA (Tax Cuts and Job Act).
• Deductions for tips and overtime pay.
• Reduces taxes on social security.
• A child tax credit increase.
• Manufacturing deductions for new U.S. manufacturing facilities, accelerated depreciation, and enhanced semiconductor tax credits.
• Various measures to invest in infrastructure and defense spending.
• Expansion of Oil and Gas production.
• Agricultural support.
• SALT deduction rose from $10,000 to $40,000 a year.

Stock Market Valuation and Bull Market History

Stock Market valuations are not high or low.  Valuations tend to peak before the end of a bull market.  Any correction would lower valuations and likely set up the next leg of the current bull market.

History implies this bull market has more time to run. 

Bull markets, on average, go 173 days without a 10% correction or more and 707 days without a 20% correction or more.  The current bull market has gone 72 days without a 10% correction or more.  While the S&P 500 has gone 695 days without a 20% correction or more, many prominent indices like Nasdaq did drop more than 20% on the recent pullback.  In addition, the S&P 500 did drop more than 20% intra-day on April 8, and we remain in a secular (long-term) bull market that started in 2009. 

The average bull market within a secular bull market goes 331 days without a 10% or more correction, and 1105 days without a 20% or more correction. 

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