The State of Markets: “Equities Resilient (for now!)”
“US expects $50 billion a month in tariff revenues, US Commerce chief Lutnick says”
Source: Reuters article headline, published yesterday (& available HERE)
US equities sold off sharply last Friday, on weaker than expected payrolls & disappointing ISM manufacturing data. This week, despite further softness in the macro data (e.g. soft ISM services), equities have bounced back and stabilised somewhat above their mid-July lows (see Key Chart below).
On the surface, therefore, equities appear resilient. They’ve been supported, seemingly, by (i) lower rate expectations (with two cuts now priced for later this year); and (ii) a strong Q2 earnings season, which has almost finished. Indeed, as of this morning, 453 of the S&P500 companies have reported earnings. Of those, 365 (80%) have surprised to the upside (on average by 8.4%). With that, overall earnings growth has been strong (+11.4%), and is expected to accelerate further over the next four quarters (peaking at 18.3% in Q2 2026).
Naturally that begs the question: Is the economy really slowing? And, if so, will earnings disappoint? And, when will this market feel the pinch of tariffs (which are expected to squeeze profit margins)? Yesterday’s comments by Lutnick were troubling in that respect – highlighting the risk that tariff revenue will double from around its current rate (of $26bn in June). As such, the question becomes: Is there more downside in this equity market? For detailed analysis please see this week’s ‘Tactical Equity Asset Allocation’ update (available to subscribers, see link below).
Next week’s key US macro data includes headline and core CPI for July (published on Tuesday, shortly after the NFIB report). That will be followed by PPI on Thursday and retail sales & Michigan sentiment on Friday. In Europe the key data includes German and Eurozone (EZ) ZEW on Tuesday, followed by EZ employment on Thursday. Several key economies are reporting their first estimates for Q2 GDP next week, including the EZ and UK (on Thursday) and Japan (on Friday). Elsewhere Chinese total social financing and money supply data for July is expected on Thursday.
Key chart: S&P500 Sept ’25 futures candlestick with 50 & 200 day moving averages
Upcoming important data/events this week:
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Events: |
RBA policy decision (Tues, 5:30am). |
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Monday: |
N/A |
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Tuesday: |
US NFIB small business optimism (July, 11am); US headline & core CPI (July, 1:30pm). |
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Wednesday: |
German headline CPI (July final estimate, 7am). |
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Thursday: |
UK GDP (Q2 first estimate, 7am); Eurozone GDP & employment (Q2 first estimate, 10am); US headline & core PPI (July, 1:30pm). |
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Friday: |
Japanese GDP (Q2 first estimate, 12:50am); US retail sales (July, 1:30pm); US Michigan Sentiment (Aug first estimate, 3pm).
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Key earnings: |
Alibaba (Thurs). |
Key Research
Tactical Equity Asset Allocation No. 259, 6th August 2025:
“Equities: Summer Turbulence Risk Ongoing a.k.a. Keep Cautious (for now)”
The case for ‘summer turbulence’ in equities remains relatively robust. That is, the US economy is slowing; the Fed is reticent to loosen policy; earnings expectations are ‘too high’; liquidity in markets is about to tighten (i.e. in Q3); and our medium term models are either on or close to SELL.
Elsewhere there are signs of froth and speculation, with tight credit spreads, elevated retail activity, and frothy valuations across most large cap US equities. As such, near term risks are skewed to the downside. The risk reward therefore favours staying NEUTRAL (for now).
Key North American macro data & events:
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Events: |
Speeches by the Fed’s Barkin on the economy (Tues, 3pm), Goolsbee at a monetary policy luncheon in Illinois (Wed, 6pm), Bostic on the economic outlook (Wed, 6:30pm) & Barkin in a NABE webinar (Thurs, 7pm). |
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Monday: |
N/A |
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Tuesday: |
US NFIB small business optimism (July, 11am); Canadian building permits (June, 1:30pm); US headline & core CPI (July, 1:30pm); US Federal budget balance (July, 7pm). |
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Wednesday: |
N/A |
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Thursday: |
US headline & core PPI (July, 1:30pm); US weekly jobless claims (1:30pm). |
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Friday: |
US retail sales (July, 1:30pm); Canadian manufacturing & wholesale sales (June, 1:30pm); US imports and exports price index (July, 1:30pm); Canadian existing home sales (July, 2pm); US industrial & manufacturing production & capacity utilisation (July, 2:15pm); US business inventories (June, 3pm); US Michigan Sentiment (Aug first estimate, 3pm); US total TIC flows (June, 9pm). |
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Key earnings: |
Cisco (Wed); Applied Materials, Deere & Company (Thurs). |
Fig B: US inflation (Y-o-Y %), split by services, durable goods, & nondurable goods _
Key European macro data & events
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Events: |
N/A |
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Monday: |
Italian headline & core CPI (July final estimate, 9am); Italian trade balance (June, 10am). |
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Tuesday: |
German current account balance (June, 8:45am); German & Eurozone ZEW survey – expectations & current situation (Aug, 10am). |
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Wednesday: |
German headline CPI (July final estimate, 7am); Spanish headline & core CPI (July final estimate, 8am). |
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Thursday: |
French headline & core CPI (July final estimate, 7:45am); Eurozone industrial production (June, 10am); Eurozone GDP & employment (Q2 first estimate, 10am). |
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Friday: |
German wholesale price index (July, 7am). |
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Key earnings: |
N/A |
Fig C: Eurozone industrial production (Y-o-Y %)
Key UK macro data & events
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Events: |
N/A |
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Monday: |
N/A |
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Tuesday: |
BRC retail sales (July, 12:01am); employment, jobless claims & average weekly earnings (July/June, 7am). |
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Wednesday: |
N/A |
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Thursday: |
RICS house price balance (July, 12:01am); GDP (Q2 first estimate, 7am), monthly GDP estimate, industrial & manufacturing production, goods trade balance & construction output (June, 7am). |
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Friday: |
N/A |
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Key earnings: |
N/A |
Fig D: UK GDP growth (Q-o-Q%)
Key Asia-Pacific macro data & events
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Events: |
RBA policy decision (Tues, 5:30am). |
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Monday: |
N/A |
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Tuesday: |
Japanese M2 & M3 money supply (July, 12:50am); Australian NAB business confidence (July, 2:30am). |
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Wednesday: |
Japanese PPI (July, 12:50am); Australian wages (Q2, 2:30am); Japanese machine tool orders (July first estimate, 7am). |
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Thursday: |
Australian employment data (July, 2:30am); Chinese total social financing, new yuan loans, and M0, M1 & M2 money supply (July, 10am). |
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Friday: |
Japanese GDP (Q2 first estimate, 12:50am); Chinese new & used home prices (July, 2:30am); Chinese activity data (industrial production, retail sales, fixed asset, property investment & unemployment rate – July, 3am); Japanese industrial production & capacity utilisation (June final estimate, 5:30am). |
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Key earnings: |
Tencent Holdings, Kweichow Moutai, Commonwealth Bank Australia (Wed); Alibaba, Foxconn Industrial Internet, NetEase (Thurs). |
Fig E: Japanese GDP growth (Q-o-Q%)
This week:
Longview on Friday, 8th August 2025:
“Summer Turbulence Risk Still Present -> Is ‘Crash Risk’ Rising?”
Monthly Global Asset Allocation No. 69, 8th August 2025:
“Reduce Credit Weightings in the Strategic Global Asset Allocation Recommended Portfolio”
Tactical Equity Asset Allocation No. 259, 6th August 2025:
“Equities: Summer Turbulence Risk Ongoing a.k.a. Keep Cautious (for now)”
The SHORTVIEW (& market positioning), 5th August 2025:
“OIL: The ‘Saudi Surge’ & Soft Demand”
Daily Dose of Macro & Markets:
Daily Dose of Macro & Markets 8th August 2025:
“Batting Against America -> China’s Improving Trade Balance”
Daily Dose of Macro & Markets 7th August 2025:
“Gold: Rotate, Rotate, Rotate”
Daily Dose of Macro & Markets 6th August 2025:
“Copper –> Tariffs out the Way. Fundamentals Supportive”
Daily Dose of Macro & Markets 5th August 2025:
“Chinese Housing: Any Signs of Life?”
Weekly Risk Appetite Gauge:
'Weekly Risk Appetite Gauge', 4th August 2025:
“Weekly Bearish Key Day Reversals”
Last week:
Longview on Friday, 1st August 2025:
“(MAG7) Alternatives are Emerging”
The SHORTVIEW (& market positioning), 30th July 2025:
“UK: ‘Doom Loop’ or Something Else?”
Quant Monthly Appendix, 30th July 2025:
“Part I: S&P500 Sector Valuation Overview”
Daily Dose of Macro & Markets:
Daily Dose of Macro & Markets 1st August 2025:
“Today’s NFP Data -> All Eyes on: ‘Those Not in the Labour Force’”
Daily Dose of Macro & Markets 31st July 2025:
“Hawkish Fed – More (Data) Evidence of Tight Money”
Daily Dose of Macro & Markets 30th July 2025:
“Q3 –> Liquidity Set to Tighten”
Daily Dose of Macro & Markets 29th July 2025:
“Can Europe Continue to Outperform?”
Weekly Risk Appetite Gauge:
'Weekly Risk Appetite Gauge', 28th July 2025:
“Greed Rising - Complacency Abounds”