Outlook As suspected in last week's update, investor sentiment has continued to pick up with the CNN Fear & Greed Index now in the Extreme Greed level.1 In our view, we remain cautiously optimistic. However, over short periods of time, investor exuberance can get ahead of itself, which this Index seems to do a decent job of highlighting. The 2nd quarter of 2025 proved to be rather distinctive, given unpredictable tariffs, resultant erratic consumer behavior, and corporations doing their best to smooth out the wrinkles. With this backdrop, it would be quite helpful to see how the economy and businesses fared over this period. Unfortunately, investors have to wait a while longer (July 30th) for the advanced estimate of the 2nd quarter's GDP. Additionally, 2nd quarter earnings are set to kick in full gear next week. As a result, justification (or folly) for extreme greed levels as measured by the CNN Fear & Greed Index will not come in higher doses for a bit longer. That said, the market seems to have an uncanny way of sniffing out the details rather efficiently, often beating the headlines. . . . The U.S. equity market closed out the holiday-shortened week with solid gains. The S&P 500 reached the 6,200-point level for the first time on Monday, surpassing the previous all-time high record set at the 6,000-point level. The Nasdaq Composite also reached a new high, driven by outperformance in the tech sector. While the Dow Jones Industrial Average and Russell 2000 also closed at their highest levels since February. Positive trade developments and encouraging labor market data drove sentiment in the prior week. On Wednesday, U.S. President Donald Trump announced a trade deal with Vietnam. The agreement established a 20% flat tariff on all imports from Vietnam into the U.S., along with a 40% tariff on transshipped goods flowing through Vietnam from third-party countries attempting to circumvent U.S. tariffs. The U.S. will also benefit from duty-free access to Vietnam’s markets.2 While the 20% tariff is higher than the original 10%, it is much lower than the 46% announced on Liberation Day. Overall, markets interpreted the deal as a step in the right direction. The deal is viewed as a net positive due to the added clarity in the trade landscape and also for the strategic component of targeting transshipment practices, especially from China. Turning to the labor market, both the monthly nonfarm payrolls report and the JOLTs job openings conveyed a surprisingly healthy labor market. Job openings in May came in higher than expected (7.769M vs. 7.320M), while the highly anticipated nonfarm payrolls report showed stronger-than-expected employment change in June (147K vs. 111K). Key Statistics include:
Nonfarm Payrolls: 147K v. 111K est. (upwardly revised 144K prev.)
Unemployment Rate: 4.1% v. 4.3% est. (4.2% prev.)
Average Hourly Earnings (MoM): 0.2% v. 0.3% est. (0.4% prev.)
Average Hourly Earnings (YoY): 3.7% v. 3.9% est. (3.8% prev.) The June jobs report shows continued resilience in the labor market, as the level of jobs added remains above what is needed to stimulate further growth and prevent a rise in the unemployment rate. Additionally, wage growth continues to outpace the rate of inflation, and the unemployment rate unexpectedly fell to 4.1%, the lowest since February. The payroll data is of key importance to the Federal Reserve as the committee monitors the ‘maximum employment’ side of their dual mandate, stable prices being the other. A strong labor market and easing/steady inflation provide little incentive for the Fed to initiate a rate cut in July. Immediately following the release, market expectations for a cut in July fell to 5%, down from 24% the day before, according to the CME FedWatch Tool. Futures also reduced the number of expected cuts this year from three to one or two.3 | 
