Week of July 07, 2025

Key Points for the Week

• The S&P 500 had another strong week last week and made more new highs along the way.
• After a negative first quarter, stocks gained double digits in the second quarter.
• June payrolls surprised strongly to the upside, but the dependence on growth in non-cyclical areas of the economy is somewhat concerning.
• Aggregate income growth has been easing, not at all to a recessionary level, but to a pace that may lead to 1–2% GDP growth.

---

Current Trends & News is a weekly financial recap curated by SPC Financial®’s team of wealth management and tax-integrated advisors.* We monitor and explore the intricacies of the financial world and share insights into market developments.

---

Economic Update

From April through June, investors rode markets up and down, banking through twists of news and events that had market moving potential. They swooped through the uncertain impact of tariffs on economic growth and inflation; the implications of a U.S. Treasury downgrade; the effects of fiscal policy changes in the Big Beautiful Bill; and conflicts in Ukraine and the Middle East. Here are some highlights from the quarter:

• Tariff turmoil. In early April, President Trump announced tariffs on a much larger scale than anyone expected, startling investors and raising concerns about economic growth and price inflation, reported Sarah Hansen of Morningstar. The CBOE Volatility Index (VIX), which is known as Wall Street's fear gauge, shot up to 60. (Any reading above 30 signals a high level of fear, risk, and anticipated volatility.) As the VIX rose, the stock market fell.
• “The Dow shed 2,000 points in a day for the fourth time in the index's history. All told, U.S. stocks shed some $6.6 trillion in market cap in the past two days based on preliminary figures...That's the largest two-day market cap slide for U.S. listed stocks on record.” Connor Smith, Barron’s

• A fast recovery. President Trump delayed immediate action on tariffs, opening the door to trade negotiations. His actions reassured investors, and U.S. stocks climbed to new highs. Through last week, “The S&P 500 is up 26 [percent] from the selloff low on April 8, while the Nasdaq has surged 34.9 [percent], as the worries, from supersized tariffs to the U.S.'s artificial-intelligence dominance, have slowly faded,” reported Teresa Rivas of Barron's.

  International stocks performed even better than U.S. stocks did. “European stocks, a thoroughly unloved asset class in January, have trounced the S&P 500 by 16 percentage points in dollar terms, the biggest outperformance since 2006...After underperforming the US market every year since 2017, developing-country equities are finally winning, helped by a boom in [artificial intelligence] companies from Taiwan, South Korea and China.” Alice Gledhill, Malavika Kaur Makol and Sagarika Jaisinghani, Bloomberg

• Excellent earnings growth. During earnings season, companies let investors know how they performed in the previous quarter. Collectively, companies in the Standard & Poor's (S&P) 500 Index reported earnings growth of 12.9 percent for the first quarter of 2025. It was the second consecutive quarter of double-digit earnings growth, reported John Butters of FactSet. (Earnings are a measure of profitability.)

  Tariffs were the hot topic on earnings calls. They were mentioned by 427 S&P 500 companies. Some companies were concerned about tariffs. Some were not.

• The U.S. Federal Reserve (Fed) kept rates unchanged. Despite significant pressure from the administration to stimulate the economy by lowering rates, the Fed left the federal funds rate unchanged. At the end of the quarter, inflation was near the Fed's two percent target and unemployment remained low. Both suggest the economy remains resilient.

Major U.S. stock indexes continued to move higher last week, with the S&P 500 and Nasdaq finishing the week at record highs. Yields on U.S. Treasuries moved higher last week after a stronger-than-expected employment report lowered expectations that the Fed might cut the federal funds rate in July, reported Sean Conlon, Alex Harring, and Sawdah Bhaimiya of CNBC.

---

This Week in the Markets

The S&P 500 gains an average of 4.3% in the first half of the year, which makes the 5.5% gain in the first half of 2025 better than an average year. We found that years that were up 5–10% at the midpoint of the year tended to do quite well the rest of the year, higher a very impressive 13 out of 15 times and up 6.4% on average, better than the average final six months of 4.8%.

This may be the sweet spot for stronger performance and higher prices the rest of this year.

June Payrolls

June payrolls came in above expectations, with headline payrolls rising 147,000 versus expectations for a 106,000 increase. Moreover, the unemployment rate eased a bit to 4.1%, versus expectations for an increase from 4.2% to 4.3%. On the face of it, this was a big positive because the “whisper numbers” were more pessimistic. Fueling the pessimism, President Trump once again called for Federal Reserve Chair Powell's resignation on Wednesday evening, right around the time the President typically gets the payroll data.

As noted above, the headline payroll increase was very positive at +147,000, and we saw a net upward revision of +16,000 jobs for April and May too, taking the 3-month average to 150,000. The upward revisions are not significant, but it was welcome after a recent string of big downward revisions.

To be clear, the labor market hasn't broken, but it's not really all that strong either. There are any number of issues under the hood. For one thing, job growth has really slowed. The economy has created 782,000 jobs over the first six months of the year, versus 985,000 over the first six months of 2024 and 1.5 million over the first six months of 2023. The pace of job growth has eased to 1.1% year over year, down from 1.3% in December 2024. Back in 2018–2019, payrolls grew at an annualized pace of 1.4%.

One difference is that immigration has really slowed this year and so the economy needs fewer jobs to keep up with population growth. This does help keep the unemployment rate lower, but it's accomplished with slower job growth.

Immigration has slowed to an annualized pace of around 600,000, about a third lower than where it was in Q4 2024. And we'd already started seeing a slowdown after mid-2024, on the back of a big drop in unauthorized immigration, which has gone into reverse this year (with deportations). Analysis from Goldman Sachs suggests net immigration may slow even further to around 500,000 by year-end. It was running over two million between 2022 and 2024—there's a reason why payroll growth averaged about 254,000 a month during those three years. The economy basically had to create that many jobs to keep up with population growth. Of course, this also drove aggregate income growth well above the pre-pandemic trend, which in turn drove real GDP growth close to 3% annualized in 2023–2024.

All said and done, if net immigration pulls back to 500,000, which would be much lower than the 2017–2019 pace (averaging about a million per year then), the economy likely must create just 60,000–80,000 to keep up with population growth. And if the economy is doing that, and then some, we're unlikely to see the unemployment rate increase either.

The unemployment rate pulled back from 4.2% to 4.1% (actually, 4.24% to 4.12%), which was a big positive, along with the fact that the prime age (25-54) employment-population ratio rose to 80.7%, not far below the peak level of 80.9% we saw this cycle (last summer). Looking at the unemployment rate, the problem is that 130,000 people left the labor force, making the numbers look better. Employment within the household survey, which is where we get the unemployment rate from, rose just 93,000 in June, but keep in mind that this survey is significantly noisier than the establishment survey that gives us the headline jobs number. The household survey has a 95% confidence interval of +/- 600,000 versus +/- 150,000 for the establishment survey.

We do want to caution that none of this implies the labor market is breaking down. In fact, the ranks of multiple job holders are growing, which is positive, as this would happen only if the economy was creating more jobs, and workers could actually find more than one job. Multiple jobholders are now 5.4% of those employed, which is higher than it was at the end of last year (5.2%).

Weak Job Creation Breadth Across Industries

As has been the case for several months now, job growth is mainly being driven by non-cyclical areas of the economy:

• Government: +73,000 (50% of June payrolls)

  • Mostly state/local payrolls which, rose 80,000
  • Federal payrolls fell by 7,000
• Healthcare and social assistance: +59,000 (40%)

These two areas accounted for 90% of June payroll growth. There is likely some seasonal adjustments, especially for state/local government payrolls, which were boosted by education. In any case, these non-cyclical areas account for 69% of the 782,000 jobs created this year:

• Healthcare and social assistance: +405,000
• Government: +138,000

Leisure and Hospitality jobs have increased 64,000 this year, and construction is not bad either, with payrolls increasing by 35,000 year-to-date. The problem is that relatively high-paying cyclical areas have seen payrolls shrink:

• Manufacturing: -10,000
• Professional and business services: -11,000
• Tech (within information): -11,000
• Wholesale trade: -3,600
• 

Goldman Sachs estimates that job growth in the industries most exposed to immigration policy changes declined to 7,000 on a three-month average basis through May, the latest month for which payroll employment data is available at the detailed industry level. That compare to 12,000 in April and 27,000 on average in 2024. Payroll employment in the industries most exposed to negative effects from higher tariffs declined by 1,000 on a three-month average basis through May (versus -4,000 in April and -3,000 on average in 2024), while employment in the industries most exposed to positive effects from higher tariffs increased by 1,000 (versus -5,000 on average in 2024).

Policy is having an impact in different pockets of the economy.

Income Growth Is Easing

Average hourly earnings eased to an annualized pace of 2.7% in June and ran at an annualized pace of 3.1% over the past three months. For non-managers (“production and supervisory workers”), wage growth ran at an annualized pace of 3.5% over the last three months. This pace is almost exactly where we were pre-pandemic (January 2019–February 2020). By itself this is not a bad pace for wage growth, and clearly not a driver of inflation. It also tells you that that any supply shortages in the labor force are not having an aggregate impact on wages (lower supply would otherwise boost wages).

The problem is that interest rates are in a very different place. Back in 2019 the fed funds rate was at 1.9% whereas it's at 4.4% now. Of course, inflation is now running higher. Core personal consumption expenditure inflation (the Fed's preferred inflation measure) is at 2.7% versus about 1.6% in 2019.

Easing wage growth along with easing job growth means aggregate income growth across the economy is also pulling back. Aggregate income growth is the product of the following:

• Wage growth, which is easing
• Payroll growth, which is easing
• Hours worked, which is slightly easing

Over the past three months, aggregate income growth has slowed to an annualized pace of 3% over the past three months, the slowest pace we've seen in a very long time (including 2018–2019). Note that this is nominal income growth and should give you a sense of the speed of nominal consumption growth and GDP growth (unless borrowing surges).

The big picture is that the labor market is cooling, with slowing job growth and wage growth, and that's driving aggregate income growth. That will likely pull down the rate of economic growth to something like 1–2%, especially since cyclical areas like manufacturing and housing are also a drag on growth right now thanks to tariff uncertainty and elevated rates. The economy is clearly slowing. For any sort of acceleration going forward we need a catalyst, whether from fiscal or monetary policy.

---

Big Beautiful Tax Law Summary

On July 4th, President Trump signed into law the “Big Beautiful Bill.” This legislation enacts sweeping and permanent changes to numerous tax provisions, extending, enhancing, or terminating various credits, deductions, and rules. It is important to note that if nothing was done, tax breaks that millions of Americans have benefitted from would have expired. Key highlights include:

• Permanent Extensions and Enhancements:

  • Lower individual tax rates are made permanent beyond 2025.
  • Larger standard deductions for single and heads of household taxpayers.
  • Child tax credit increased and made permanent with stricter ID requirements.
  • The Estate and gift tax exemption is raised permanently to $15 million.
  • Alternative Minimum Tax (AMT) exemptions increased and permanently extended.
  • Enhanced childcare and adoption credits.
  • Permanent renewals of Opportunity Zones, New Markets Tax Credit, and Low-Income Housing Credits.
  • Expansion of 529 plan qualified expenses to include postsecondary credentialing.

• New Tax Benefits and Programs:

  • Temporary deductions for tips, overtime pay, and car loan interest (2025–2028).
  • Creation of tax favored savings accounts for children with government contributions for some.
  • New tax credit for contributions to K-12 scholarship organizations.
  • Expanded exclusions for employer-provided student loan payments.

• Limitations and Changes to Deductions:

  • Permanent limitation and adjustment of mortgage interest, casualty loss, and miscellaneous itemized deductions.
  • New limitations introduced on itemized deductions based on income thresholds.
  • State and Local Tax (SALT) deduction cap raised temporarily but phases down as income exceeds certain thresholds.
  • New floor on charitable deductions for individuals (0.5% AGI) and corporations (1% taxable income).

• Termination of Energy and Clean Vehicle Credits:

  • Credits for new and used clean vehicles, commercial clean vehicles, clean energy property, and various energy efficiency incentives end between 2024 and 2028.
  • Introduces restrictions on foreign ownership and materials for clean energy production credits.

• Other Provisions:

  • Increased limits and indexing on 1099 reporting thresholds.
  • Adjustments to charitable deduction carryforwards.

If you have any questions about the bill and how it may impact your financial plan, please contact us.

---

FBI Warns of Suspicious Text Message Scams

The FBI has issued a warning to 150 million Apple and Android users to be aware of malicious text messages being sent to their phones. The text message scam warns individuals of significant consequences if outstanding bills or fines are not paid immediately. The messages currently include unpaid tolls and newer DMV traffic offenses, but will eventually mimic texts from bank and credit card companies, per the FBI. The FBI reported that there was an 800% increase in fraudulent DMV-themed texts in the first week of June alone.

Not only are the cybercriminals impersonating a DMV, but they are also impersonating law enforcement officials, demanding payment for fines or missed court appearances to avoid arrest.

“Scammers always prey on people's fears. They are always opportunistic. They try to ratchet up that sense of urgency so that you do not think about what you are doing and then send the money.” Spokesperson from the FBI

If you receive a suspicious text message, the FBI and other agencies suggest that you do not click any link the message contains and to delete the message immediately.

---

A Reminder About Scams

Scams usually start with a phone call, email, text, or another form of communication. The person typically claims to be from an agency or organization you know – or one that sounds like it might benefit you, such as the National Sweepstakes Bureau or a lottery.

The person may know your name and address. They may give you their official title or an identification number. No matter how official they seem, you can be confident it is a scam if the person contacting you:

• Indicates there is a problem with your benefits.
• Asks you to pay to receive a prize.
• Suggests that paying will increase the chance of winning.
• Requests financial information, such as a bank account or credit card number.
• Pressures you to act immediately.
• Tells you to pay using a specific method, such as a gift card or cryptocurrency.

If this happens, remember that the Social Security Administration, the Internal Revenue Service, Medicare, and your bank do not call, email, or text to ask for money or personal information. They do not demand that you pay immediately, and they do not accept payment by gift card, prepaid debit card, cryptocurrency, or another untraceable form of money transfer.

When you suspect a scam:

• Hang up or close the message. Do not respond in any way.
• Remain calm.
• Think back over the call. Write down any personal information you may have inadvertently shared.
• Report the scam. Contact the Federal Trade Commission at ReportFraud.ftc.gov. You may also want to report the incident to your state's attorney general or your local consumer protection agency.
• Share your knowledge. Talk with family, friends, and neighbors about your experience so they know what to look out for.

When you receive a digital message, no matter how official it seems, do not click on any links. Do not give or confirm any personal information, including your name, birth date, phone number, address, email address, place of birth, driver's license, passport, or Social Security numbers, bank or other account numbers, and PIN numbers.

Being skeptical can keep you safe. Remove yourself from the situation. Do not share information. If you feel anxious and need to confirm that it was a scam, contact the organization using a method provided on their official website.

---

Did you Know? This Week in History

July 10, 1962: U.S. Patent Issued for Three-Point Seatbelt

On July 10, 1962, the United States Patent Office issued the Swedish engineer Nils Bohlin's patent for his three-point automobile safety belt “for use in vehicles, especially road vehicles.”

Safety-belt use in automobiles was limited mostly to race car drivers; the traditional two-point belt, which fastened in a buckle over the abdomen, had been known to cause severe internal injuries in the event of a high-speed crash. Bohlin designed his three-point system in less than a year, and Volvo introduced it on its cars in 1959. Consisting of two straps that joined at the hip level and fastened into a single anchor point, the three-point belt significantly reduced injuries by effectively holding both the upper and lower body and reducing the impact of the swift deceleration that occurred in a crash.

On August 17, 1959, Bohlin filed for a patent in the United States for his safety belt design. The U.S. Patent Office issued Patent No. 3,043,625 to “Nils Ivar Bohlin, Goteborg, Sweden, assignor to Aktiebolaget Volvo” on July 10, 1962.

Volvo released the new seat belt design to other car manufacturers, and it quickly became standard worldwide. The National Traffic and Motor Vehicle Safety Act of 1966 made seat belts a required feature on all new American vehicles from the 1968 model year onward. Though engineers have improved on seat belt design over the years, the basic structure is still Bohlin's.

The use of seat belts has been estimated to reduce the risk of fatalities and serious injuries from collisions by about 50 percent.

---

Weekly Focus

“There is no such thing as bad weather, only unsuitable clothing.” Iris Murdoch, Irish-British Novelist and Philosopher

“The great enemy of truth is very often not the lie: deliberate, contrived, and dishonest, but the myth: persistent, persuasive, and unrealistic.” John F. Kennedy, 35th President of the United States

---