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Weekly Market Outlook - July 19, 2025

By Samuel Leach

Executive Summary

Another fascinating week in the markets has come to a close, and I must say, the resilience we're seeing across major indices continues to impress me. As I write this on Saturday morning, I'm reflecting on what has been a week of mixed signals, record highs, and the kind of market dynamics that separate the wheat from the chaff in this business.

The Nasdaq Composite has done it again, notching its 11th record high of 2025 with a modest but meaningful 0.05% gain to close at 23,165. Meanwhile, the S&P 500 held remarkably steady at 6,296.79, down just a whisper at -0.01%, while the Dow Jones took a more pronounced hit, falling 0.32% to 44,342.19. What strikes me most about this week is not the individual daily movements, but the underlying story these numbers tell about market sentiment and the road ahead.

The Big Picture: Markets Shrug Off Tariff Tensions

If there's one thing I've learned in my years of trading and market analysis, it's that markets have an uncanny ability to look through short-term noise and focus on fundamentals. This week provided a perfect example of that principle in action.

President Trump's reported push for minimum tariffs of 15-20% on European Union goods should, in theory, have sent shockwaves through global markets. The August 1 deadline for sweeping duties looms large, and the Financial Times reporting on these developments typically moves markets significantly. Yet here we are, with the S&P 500 posting a weekly gain of 0.6% and the Nasdaq surging 1.5% for the week.

This tells me something crucial about the current market psychology. Investors are increasingly confident that the underlying economic fundamentals remain sound, and they're betting that any trade disruptions will be temporary rather than structural. The fact that we saw fresh economic data this week showing little indication that existing tariff policies are affecting consumer spending habits only reinforces this view.

I've been watching the VIX closely, and at 16.41 (down 0.67% for the week), we're seeing what I would characterise as dangerous complacency. When fear is this low, it often precedes periods of increased volatility. Smart money should be preparing for this possibility while taking advantage of the current rally.

Federal Reserve: The Elephant in the Room

The Federal Reserve's position continues to be the single most important factor driving market sentiment, and this week's developments have been particularly telling. The June Consumer Price Index data showed inflation rising to 2.7% annually, up from 2.4% in May, marking the highest level since February. Core CPI came in at 2.9% annually, which while slightly below the 3% consensus, still represents an acceleration from May.

What's particularly interesting to me is how the market has interpreted this data. Rather than panicking about rising inflation, investors seem to be taking comfort in the fact that the numbers weren't worse than expected. The University of Michigan consumer sentiment survey provided additional context, showing one-year inflation expectations dropping to 4.4% from 5% in June. This suggests that while current inflation is ticking up, consumers don't expect it to spiral out of control.

The Fed funds futures market is now pricing in a 97% probability that the Federal Reserve will hold rates steady at their July 29-30 meeting, up from 93% earlier in the week. This represents a significant shift in expectations, and I believe it's the right call. Fed Governor Waller's recent speech indicated that the labour market is weaker than headline numbers suggest, which provides some counterbalance to the inflation concerns.

Looking ahead, the market is now expecting just 1-2 twenty-five basis point cuts for the remainder of 2025, down from the previous week. This recalibration of expectations is healthy and suggests that investors are becoming more realistic about the Fed's likely path forward.

International Markets: FTSE 100 Breaks New Ground

Across the pond, the FTSE 100 has been putting on quite a show, breaking above the psychologically important 9,000 level and posting its fourth consecutive week of gains. This is particularly impressive given the headwinds facing the UK economy and the ongoing uncertainty around global trade policies.

The pound has been on quite a journey, trading around 1.34 against the dollar after reaching a 3.5-year high of 1.3790 earlier this month. The pullback from those highs is natural and healthy, and I see the current levels as potentially attractive for those looking to gain exposure to UK assets.

What's driving the FTSE's strength? Several factors are at play. First, many FTSE 100 companies generate significant revenues overseas, so they benefit from a weaker pound. Second, the index trades at attractive valuations compared to US markets, making it a compelling value play for international investors. Third, there's growing confidence that the UK economy is finding its footing after years of Brexit-related uncertainty.

I'm particularly bullish on the FTSE 100's prospects for the remainder of 2025. The combination of attractive valuations, dividend yields that surpass those found in US markets, and improving economic fundamentals creates a compelling investment case.

Commodities: Gold Shines, Oil Consolidates

The commodity markets have provided some of the most interesting action this week, with precious metals continuing their impressive run while energy markets consolidate in familiar ranges.

Gold closed the week at $3,358.30, up 0.39%, and continues to trade near all-time highs. What I find most compelling about gold's current performance is that it's rising despite a relatively strong dollar and rising real interest rates. This suggests that investors are viewing gold not just as an inflation hedge, but as a genuine safe-haven asset in an increasingly uncertain geopolitical environment.

Silver has been even more impressive, trading around $38.46 and approaching 13-year highs. The gold-to-silver ratio has been compressing, which historically suggests that precious metals are in a genuine bull market rather than just a temporary flight to safety.

Oil markets have been more subdued, with WTI crude trading around 67.34 and Brent at 69.28. Both benchmarks are down slightly for the week, but I view this consolidation as healthy after the significant moves we've seen earlier this year. Goldman Sachs raised their Brent forecast for the second half of 2025 to 66 per barrel, up 5 from their previous forecast, which suggests that even the investment banks are becoming more constructive on energy prices.

The key driver for oil continues to be the balance between supply and demand. OPEC+ remains cautious about increasing production, while demand signals from the US remain robust despite some inventory builds. I expect oil to remain range-bound in the near term, with WTI trading between 64 and 68, and Brent between 64 and 70.

Copper deserves special mention, gaining 1.67% for the week to trade around $5.60. This is significant because copper is often viewed as a barometer of global economic health. The strength we're seeing suggests that industrial demand remains robust, which is a positive sign for the broader economy.

Sector Analysis: Technology Leads, Financials Lag

The sector rotation story continues to evolve, with technology stocks once again leading the charge. The Nasdaq's outperformance this week was driven primarily by renewed optimism around artificial intelligence and the upcoming earnings reports from major tech companies.

Speaking of earnings, next week will be crucial as we get our first look at results from the "Magnificent Seven" tech giants. Alphabet reports on Wednesday, followed by Tesla on Thursday. These reports will provide critical insights into whether the AI investment thesis is translating into actual revenue growth and margin expansion.

I'm particularly interested in Alphabet's results, as the company has been investing heavily in AI infrastructure while facing increased competition in search and cloud computing. The market is expecting earnings per share of $2.17, up 15% year-over-year, but I'll be focusing more on the commentary around AI monetisation and cloud growth rates.

Tesla presents a different set of challenges and opportunities. The stock is down 21% year-to-date despite the broader market's strength, reflecting concerns about electric vehicle demand and increased competition. However, the company's robotaxi ambitions and energy storage business could provide positive surprises.

Financial stocks have been lagging, which is somewhat surprising given the higher interest rate environment. I suspect this reflects concerns about credit quality and the potential for economic slowdown. However, I see this as potentially creating opportunities for selective stock picking in the sector.

Looking Ahead: Key Events and Catalysts

As we head into the next week of July, several key events will shape market sentiment and potentially drive significant price movements.

The Federal Reserve's July 29-30 meeting is the marquee event, though as I mentioned earlier, the market is pricing in a 97% probability of no change in rates. What will be more important is Chair Powell's press conference and any updates to the Fed's economic projections. I'll be listening carefully for any hints about the timing of future rate cuts and the Fed's assessment of inflation trends.

Earnings season is just getting started, and beyond Alphabet and Tesla, we'll see reports from a wide range of companies across different sectors. The key themes I'll be watching are margin pressure from higher labour costs, the impact of tariffs on input costs, and any signs that consumer spending is beginning to slow.

Economic data will also be crucial, with several important releases scheduled. The advance estimate of second-quarter GDP will provide insights into the economy's momentum, while the Personal Consumption Expenditures index will give us the Fed's preferred measure of inflation.

Geopolitically, the August 1 deadline for potential EU tariffs continues to loom large. While markets have largely shrugged off these concerns so far, any escalation in trade tensions could quickly change sentiment.

Trading Strategy and Positioning

Given the current market environment, I'm maintaining a cautiously optimistic stance with a focus on quality companies that can navigate the current uncertainties.

In equities, I continue to favour large-cap technology stocks with strong balance sheets and sustainable competitive advantages. The upcoming earnings reports will provide opportunities to add to positions in companies that demonstrate strong execution and clear AI monetisation strategies.

I'm also selectively adding to international exposure, particularly in the UK market. The FTSE 100's breakout above 9,000 suggests further upside potential, and the attractive valuations provide a margin of safety.

In commodities, I remain bullish on precious metals as a hedge against both inflation and geopolitical uncertainty. The technical picture for both gold and silver remains constructive, and I expect continued strength as central banks around the world continue to add to their gold reserves.

For oil, I'm taking a more tactical approach, looking for opportunities to buy on weakness within the established trading ranges. The fundamental supply-demand balance remains supportive, but the market needs to work through current inventory levels before making a sustained move higher.

Currency markets present interesting opportunities, particularly in the pound sterling. While GBP/USD has pulled back from recent highs, I view this as a healthy correction in what remains a longer-term uptrend.

Risk Management and Final Thoughts

As always, risk management remains paramount in the current environment. The low VIX reading suggests that markets may be underpricing risk, which means we could see sudden spikes in volatility that catch investors off guard.

I'm maintaining appropriate position sizing and ensuring that portfolios are well-diversified across asset classes and geographies. The correlation between different asset classes has been relatively low recently, which provides natural hedging benefits.

One area of particular concern is the potential for policy mistakes, either from central banks or governments. The delicate balance between supporting economic growth and controlling inflation requires careful navigation, and any missteps could have significant market implications.

That said, I remain fundamentally optimistic about the medium-term outlook for risk assets. Corporate earnings continue to grow, albeit at a slower pace than in recent years. Innovation in areas like artificial intelligence, renewable energy, and biotechnology continues to create new investment opportunities. And while geopolitical tensions remain elevated, the global economy has shown remarkable resilience in the face of various challenges.

The key for investors is to remain flexible and responsive to changing conditions while maintaining a long-term perspective. Markets will continue to experience periods of volatility and uncertainty, but those who can navigate these challenges while staying focused on fundamental value creation will be rewarded.

As we head into the final months of summer trading, I expect continued volatility around key events like earnings reports and Fed meetings. However, the underlying trends that have driven markets higher this year remain intact, and I believe patient investors will be rewarded for maintaining their discipline and focus on quality investments.

The week ahead promises to be eventful, with major earnings reports and economic data that could significantly impact market sentiment. I'll be watching closely and will provide updates as events unfold.

Until next week, stay disciplined, stay focused, and remember that successful investing is a marathon, not a sprint.

Samuel Leach is a professional trader and market analyst with over a decade of experience in global financial markets. His insights and analysis are based on extensive research and market experience, but should not be considered as personalised investment advice. Always consult with a qualified financial advisor before making investment decisions.