WEEKLY MARKET SUMMARY
Global Equities: US stocks registered another all-time high on the holiday-shortened week, propelling the S&P 500 to close at 6,279 with a 1.7% gain. The Nasdaq Composite tacked on another 1.6% while the Dow Jones Industrial Average outperformed with a 2.3% weekly advance. Small Cap stocks enjoyed rare outperformance despite diminished rate cut hopes, surging 3.5% during the week. Developed International stocks lagged, rising just 0.2%, while Emerging Markets managed a 1.4% weekly gain.
Fixed Income: Bond yields shot higher after a hotter-than-expected June jobs report just about killed any slim hopes for a July Fed rate cut. The 10-Year US Treasury yield ended the week at 4.34% as investors predict a 70% chance that the Fed will cut rates in September. High yield corporate bonds continued their strong uptrend, gaining another 0.5% during the week.
Commodities: Crude prices were stable as tensions in the Middle East eased. US West Texas Intermediate (WTI) ended the week at $66.81. Gold prices picked up, rising to $3,345 as investors braced for higher inflation as the US government looks poised to increase the federal debt burden with the “Big Beautiful Bill”.
WEEKLY ECONOMIC SUMMARY
June Jobs Report: The headline of the June jobs report was a better-than-expected gain of 147,000 jobs and a decline in unemployment to 4.1%. While the number was impressive, there was some underlying private sector weakness with 73,000 of the gains coming from Government jobs, making private sector growth the weakest since October 2024. Still, the low unemployment rate was enough to trigger a solid rally in markets, although the bond market sold off as the Fed will undoubtedly continue to hold off on rate cuts.
Trump vs Powell: President Trump once again called out Jerome Powell for not cutting rates and now rumors that Treasury Secretary Scott Bessent could be his replacement are circulating. Powell’s term ends in May 2026 and the Supreme Court has defended the Fed’s independence despite Trump’s publicly stated desire to fire the Fed Chair. Trump may be pursuing a new avenue to remove Powell, with FHFA head Bill Pulte (of homebuilder Pulte Homes, which would be a major beneficiary of lower rates) calling for Powell to be removed ‘for cause’ over what Pulte states are misrepresentations during his recent congressional testimony.
Tariff Deal Deadline: Trump’s 90-day pause on ‘reciprocal’ tariffs expires on July 9th, with only partial framework agreements reached with the UK, China, and Vietnam being the only deals of note. This is a far cry from the ‘90 Deals in 90 Days’ that were promised, but President Trump has dismissed the significance of the expiration, stating he would simply send letters to each country with their new tariff rate. Trump secured a big win from Canada, which rescinded a digital services tax after Trump cut off all negotiations last week.
CHART OF THE WEEK
The Chart of the Week shows the year-to-date performance of the S&P 600 Small Cap Index, along with the 50-day (blue line) and 200-day (red line) moving averages. Small Cap stocks are typically more interest rate sensitive, and have also faced headwinds from higher tariffs, since smaller companies have less pricing power and ability to absorb tariffs than larger companies. Despite these challenges, small cap stocks have recovered sharply from their lows and are now back above the 200-day trendline. The bull thesis for small caps lies in the valuations, which are trading at a huge discount relative to large caps compared to historical norms.
