Joseph’s Financial Roundup – August 2nd Weekly Edition (2025)

Markets Weekly August 2, 2025 (YouTube link)

In the video above, Joseph recapped a busy week of major market moves:

• Disappointing non-farm payrolls report raised Fed policy concerns
• Fresh GDP data released
• Earnings from the MAG7 tech giants
• Geopolitical tensions added market uncertainty

Looking ahead:

• Eyes on the upcoming labor report
• Continued watch on global political developments

Summary of Markets Weekly

1. Economic Data: GDP and Labor Market

• Second Quarter GDP Print: The headline GDP growth for Q2 was 3%, surpassing expectations. However, this follows a negative 0.5% growth in Q1, largely influenced by trade war dynamics (e.g., companies front-loading imports to avoid tariffs). Averaging the first half of 2025, GDP growth is around 1.25%, significantly slower than the 2.5% seen in recent years, indicating a cooling economy.
• Core GDP Measure: The "final sales to domestic purchasers" metric, which excludes volatile components like imports, exports, and inventories, showed growth slightly above 1%, also slower than the previous year. Despite the positive market reaction to the headline GDP, the data suggests economic slowdown.
• Non-Farm Payrolls (NFP): The most significant development was the disappointing NFP report on Friday, expecting 100,000 jobs but delivering only 70,000. More critically, massive downward revisions to prior months' job numbers erased much of the previously reported job growth, indicating a much weaker labor market than anticipated. This aligns with the slowing GDP growth, reinforcing a narrative of economic deceleration.
• Unemployment and Labor Force Participation: The unemployment rate remains low at 4.2%, but this is partly due to declining labor force participation. Analyst Parker Ross estimates that if participation had held steady since April, the unemployment rate would be 4.9%, a level warranting caution. This drop in participation suggests discouraged workers are leaving the labor market.
• Market Reaction: The weak NFP data triggered a stock market sell-off, a rally in bond markets (particularly in the 10-year yield and front-end rates), and a significant dollar sell-off. Markets are now pricing in a higher likelihood of Federal Reserve rate cuts in September, with some speculating a 50-basis-point cut if the next labor report is similarly weak.

2. Corporate Earnings: MAG7 Performance

• Microsoft and Meta: Both companies beat expectations, with Meta gaining 10% post-earnings and Microsoft becoming the second company to reach a $4 trillion market cap. However, the market sold off later in the day despite these strong results, signaling potential caution or profit-taking.
• Apple and Amazon: Apple’s earnings received a lukewarm market response, while Amazon’s results disappointed, leading to a notable decline in its stock price.
• Market Dynamics: The initial market highs following Microsoft and Meta’s earnings were not sustained, suggesting underlying concerns or a shift in investor sentiment, possibly a red flag for broader market trends.

3. Federal Reserve Policy and Dissent

• Fed’s Current Stance: Fed Chair Powell has maintained that the labor market is solid and inflation remains above target (partly due to tariff effects), justifying the decision to keep rates unchanged. Powell described monetary policy as "modestly restrictive."
• Dissenting Governors: Governors Bowman and Waller dissented at the recent Fed meeting, arguing for rate cuts due to a weakening labor market. Waller described the labor market as "on thin ice," emphasizing the lag in monetary policy effects and the need for preemptive action.
• Shift in Narrative: The weak NFP data strengthens the case for the dovish faction, increasing the likelihood of a September rate cut. Commentary from New York Fed President John Williams and Cleveland Fed President suggested the labor market is still strong but acknowledged potential for cuts in September. Another weak labor report could solidify expectations for more aggressive easing.
• Governor Krueger’s Resignation: The sudden resignation of Fed Governor Krueger, who missed the recent FOMC meeting, was unexpected. Her term was set to expire early next year, but her early exit accelerates President Trump’s ability to nominate a new Fed governor. Speculation suggests Trump may appoint a loyalist to influence monetary policy, potentially acting as a "shadow Fed chair" to push for dovish policies. This could lead to a more dovish FOMC sooner than anticipated, though the appointee’s influence depends on their credibility.

4. Political Developments

• BLS Commissioner Firing: President Trump directed his team to fire the Bureau of Labor Statistics (BLS) Commissioner, a Biden appointee, citing politicization of labor market data. This move raises concerns about data integrity but aligns with a broader shift in government operations under Trump, where political appointees may face quicker replacements. The speaker notes uncertainty about the commissioner’s performance, referencing the Biden administration’s history of misleading narratives (e.g., on Biden’s health).
• Geopolitical Risks and Russia: A significant US-EU trade deal was reached, imposing 15% tariffs on EU imports with no retaliation allowed, alongside requirements for the EU to buy more US goods and natural gas. The deal appears one-sided, likely influenced by the EU’s reliance on US military support amid its conflict with Russia. Trump has escalated rhetoric against Russia, shortening a deadline for Russia to end its war with Ukraine from 50 to 10 days. Failure to comply could lead to secondary sanctions on countries like India and China for buying Russian oil. These sanctions could disrupt global oil markets, trade, and geopolitics, with markets currently underestimating this risk despite a slight oil price response.

5. Other Notes

• Treasury Refunding Announcement: The announcement was not a major focus but hints at potential changes in issuance structure, which Joseph plans to explore further in writing.
• Market Implications: The combination of a slowing economy, weak labor market, and geopolitical risks (e.g., Russia sanctions) could increase recession risks and market volatility. The bond market’s rally and dollar sell-off reflect growing expectations of Fed easing, while geopolitical developments could further impact oil and trade markets.