Weekly Macro Report, July 20 2025
1. Economic Growth & Outlook
Economic data shows mixed signals. The S&P 500 posted a 13.63% year-over-year gain as of June 2025. US GDP contracted 0.5% in Q1 2025 but is expected to rebound to over 1% in Q2. This suggests a potential recovery in economic growth, though uncertainty remains regarding employment and inflation impacts.
2. Labor Market
In June 2025, the U.S. unemployment rate declined to 4.1% as nonfarm payrolls added 147,000 jobs, indicating persistent labor market stability despite a notably low labor force participation rate at 62.4%. Given ongoing job growth and stable unemployment—plus little sustained inflationary pressure—the Federal Reserve is likely to maintain its current cautious stance, with a rate cut possible later this year if the outlook for activity or inflation shifts, but not imminent. Labor market tightness and mixed participation trends suggest policy will remain data-dependent at the July 30 meeting.
3. Interest Rates
As of mid-July 2025, the 10-year Treasury yield hovered at 4.44%, slightly easing but remaining elevated, signaling steady long-term benchmark costs for borrowing. Investment-grade corporate yields, represented by Moody’s Baa bonds, declined modestly to 6.15% in June, compressing spreads and indicating cautious optimism among businesses and investors. Meanwhile, the 30-year mortgage rate stayed above 6.8%, sustaining high financing costs for homebuyers and dampening housing affordability despite minor Treasury yield reprieves. These dynamics tighten conditions for households and businesses, balancing borrowing costs against return opportunities.
4. Yield Spreads
As of July 18, 2025, the US yield curve shows a positive spread, with the 10-year Treasury at 4.44%, indicating confidence in economic growth. The 10-Year TIPS real yield is at 1.99%, suggesting investors expect growth to outpace inflation. This combination signals strong investor risk appetite and balanced growth expectations.
5. Inflation Dynamics
As of June 2025, U.S. headline CPI rose 2.7% year-over-year, led primarily by shelter (up 0.2% monthly), energy (+0.9%, gasoline +1.0%), and food (+0.3%) sub-baskets. Core CPI climbed 2.9%, slightly above May’s 2.8%, driven by household furnishings, medical care, and recreation. Producer Price Index (PPI) increased 2.3% YoY in June, suggesting ongoing upstream inflation pressures that typically precede CPI movements. The latest U.S. 10-year breakeven inflation rate remains near 2.3%, reflecting modest but stable inflation expectations relative to global peers.
6. Money Supply
As of May 2025, the U.S. M2 money supply reached a record $21.94 trillion, growing 4.5% year-over-year—the fastest pace in nearly three years. This growth outstrips recent nominal GDP gains, suggesting liquidity is expanding above economic output, which historically exerts upward pressure on inflation. Meanwhile, CPI inflation remains elevated but has not accelerated sharply yet, consistent with the typical lagged inflationary effect from rising M2. The primary driver of M2 growth is ongoing credit expansion amid accommodative monetary conditions despite fiscal uncertainties.
7. Consumer Sentiment
Consumer sentiment improved as the University of Michigan index rose to 61.8 in July from 60.7 in June. The expectations component increased to 58.6, while the current conditions index reached 66.8. The yield curve, represented by the 10-year minus 2-year spread, was positive at 0.56, suggesting ongoing economic growth expectations.
8. Housing Market
As of mid-2025, the housing market shows rising inventory, now exceeding 1 million homes nationwide, up over 33% year-over-year, reflecting slower absorption rather than a surge in new listings. Home sales remain about 75% of pre-pandemic levels, with slight improvements but overall subdued activity amid ongoing economic uncertainty. Median prices are stabilizing, with many sellers reducing asking prices to attract limited buyers facing mortgage rates near 6.5–7%, squeezing affordability and dampening demand. This combination of elevated rates, increased supply, and lower sales suggests a cautious market balancing toward greater buyer options but persistent affordability challenges.
9. Stock Market Sectors
As of early July 2025, Financials and Technology sectors have shown notable resilience. Financials are up, driven by strong returns in banking, while Technology has benefited from AI advancements. In contrast, Health Care and Energy have lagged, with the latter particularly affected by declining oil prices and global demand shifts.
10. Stock Market Valuation
As of mid-July 2025, the S&P 500's trailing PE stands near 29, above its long-term average of about 25, reflecting elevated investor optimism despite near-term earnings plateauing. The forward PE ratio for late 2025 is around 22.5, down from prior peaks, signaling moderated growth expectations. Valuation gaps versus global peers persist, primarily due to stronger US tech sector profitability, higher investor confidence, and a heavier weight of growth stocks. International markets show comparatively lower multiples, influenced by slower earnings revisions and greater macroeconomic uncertainty.
11. Stock Market Internals
As of July 17, 2025, the CBOE Volatility Index (VIX) stood at 16.52, reflecting a relatively stable market outlook. Momentum and Growth factors continued to lead, indicating investor appetite for riskier assets. This dynamic suggests a market environment where investors are confident in economic growth prospects and are increasingly willing to take on risk.
12. Global Equity Performance
In Q2 2025, US equities led with the S&P 500 rallying 10.9%, driven by tech sectors like semiconductors and communication services delivering gains above 18%. The market rebounded from an April tariff-induced selloff, finishing near record highs. Germany's DAX and broader European indices also posted robust gains, benefiting from an 8% euro appreciation versus the dollar, supporting a 12.1% MSCI EAFE return. In contrast, emerging markets advanced 12.2%, reflecting selective strength amid global trade tensions and geopolitical uncertainty. This rotation highlights divergent momentum favoring growth and developed market cyclicals.
13. Commodities
Gold prices have climbed 30% year-to-date, peaking at $3,500 per ounce in April 2025, driven by persistent inflation of 2.7%, trade war tensions, and record central bank purchases totaling 244 tonnes in Q1. Platinum surged 37% year-to-date to around $1,415 amid severe supply deficits with half of South African mines loss-making and rising demand from automotive substitution and hydrogen applications, signaling tight fundamentals and robust industrial support. These dynamics underpin continued strength and elevated volatility in the precious metals market.
14. Crypto Market
Bitcoin trades near $118,200 on July 20, 2025, up slightly from recent dips, remaining below its July 14 all-time high of $122,197. Ethereum outperforms, trading around $3,600 after surpassing $3,500 for the first time since February, fueled by growing investor appetite for decentralized platforms. The total crypto market cap holds near $3.5 trillion, with increasing activity on decentralized exchanges suggesting a bullish tilt toward Ethereum’s ecosystem, even as Bitcoin maintains a dominant market share above 60%.
15. Currencies
The Euro strengthened notably in early July, with EUR/USD at 1.169–1.181 as European inflation hit the ECB’s 2% target, encouraging investment in German infrastructure and supporting capital inflows while reducing pressure for near-term rate cuts. The US dollar remained under pressure, held down by global risk appetite and delayed Fed rate moves amid trade uncertainty. Sterling volatility persisted due to UK fiscal concerns, but emerging market and commodity-linked currencies showed mixed signals, reflecting shifting trade flows and central bank caution as the global growth outlook becomes more balanced.
16. Debt Levels
As of early 2025, U.S. federal debt stood at around 121% of GDP. This level exceeds the Euro Area's 87% but is lower than Japan's debt-to-GDP ratio. The rising U.S. interest costs pose a significant risk, necessitating fiscal consolidation and potentially impacting investor returns due to higher fiscal uncertainty.
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