Market Insights Recap — Week of July 14, 2025

Hello. I'm Steve Orr, Chief Investment Officer for Texas Capital's Private Bank.

How about a scorecard for the turn of the year? Stock recovery and some new wallpaper for our wall of worry. What does that mean for our portfolios? What should we be thinking about?

Well, the economy is on track for slightly slower growth this year. Our forecast of 1.5% to 1.8% real GDP growth still holds. Add 3% inflation by year-end and you get nominal economic growth well above 4%. Now anything below 4% would cause us to turn on our recession radar. Full employment, positive job growth and job openings at or above job seekers means no recession. Over the last year, net job growth has averaged 150,000 or so jobs per month. Job openings have held steady just below 8 million nationwide. So the job market supply and demand are roughly in balance. We expect new job numbers to drift lower later this year, not because of a slowing economy, but because the effects of unchecked government spending and shutdown rebounds are wearing off. Long-term, job growth tracks the population growth. And that's where we're headed, sort of back to normal. No recession in our indicator dashboard. No need to adjust portfolios there. 

U.S. stocks, back near all-time highs after shaking off that Trump tariff trauma of February and April. Year to date, S&P 500 and Nasdaq up just over 7%. Very close to our full-year forecast. The primary trend remains up. Longer-term, stocks are relying on a lighter regulatory environment from D.C. and productivity boosts from AI. The short-term trend is driven by that second quarter earnings season that starts this week. July, typically the best month of the third quarter thanks to those earnings reports. According to our trusty Stock Trader's Almanac, post-election year Julys ranked number one and number two in performance, averaging about a 2% gain. This week, options expiration, so expect the indexes to move around a bit more than the last couple of weeks. We think a summer vacation is highly likely for stocks after earnings season. A 3% to 5% reversal of recent gains would not be concerning to us. Otherwise, we keep position in place, following the primary trend higher. 

Now, the Fed should lower rates to be closer to the current level of roughly 3% inflation. They'll leave rates unchanged at their July 30 meeting. Longer-term rates around 4.5% look reasonable for investors. Municipal bonds with maturities longer than 15 years? They're offering some nice yields. So we're poking around those areas looking for some value. 

Trump paused tariffs back in April in order to give Congress a head start on freezing our tax rates. Amazingly, Congress actually acted on something without there being a crisis. The One Big Beautiful Bill made permanent our current tax rates and has a host of tax breaks and incentives for businesses. These include faster expensing for big projects and R&D expenses. This fiscal relief, so-called fiscal relief, will help businesses cope with some level of tariffs once they're finalized. The budget cuts are nice, but they're not enough to meaningfully lower the deficit. On balance, the bill will help the economy. 

With Congress off the front page for the moment, it's back to tariffs for Wall Street's wall of worry. Are you surprised that Trump's new tariff threats aren't rattling the markets like in April? Don't be. First, markets are finally understanding that this is a Trump tariff tactic. Throw out an unreasonable anchor. Make the other side accept more than they otherwise would. Second, markets are more liquid, volatility levels are near seasonal lows and a decent, possibly good earnings season is about to start. Just the opposite of the spring swoon. 

So let's wrap it up. A nice quarter-end rally took us to new highs. We're going to bounce along at these levels during earnings season. Don't be dismayed by a later summer correction. Very typical market action. And we would not change positioning at this point. Any summer slump would be an opportunity to put funds to work. Rates are not changing any time soon, so cash is earning above inflation, always a good thing. Despite the headlines, the economy is in fine shape. Let us know how we can help; 'til next time.