August Economic Update
- Barrington Capital Management, Inc.
- Aug 7
- 3 min read
Market Summary
It was a relatively quiet July for the markets given the backdrop both globally and domestically. Second quarter earnings season kicked off with mixed results in a market with the second highest valuations in history, only behind the pre “Dot Com” bust back in 1999. There has been some trepidation with these valuations, especially since the surprising jobs report that was released last Friday. For the month of July, the S&P 500 gained 2.17%, the Nasdaq 100 2.38%, and the Russell 2000 moved higher by 1.68%. (1)
Tariff Update
On the trade front, the White House announced new agreements during July with key partners including the European Union, Japan, and South Korea. Discussions with China are still ongoing. While these deals avoided the worst-case scenarios feared earlier in the year, some countries may still face elevated tariffs after the negotiation window closes. On July 31, President Trump signed an executive order outlining revised tariff rates for several trading partners, with implementation now scheduled for August 7 (pushed back from the original August 1 deadline).
As of July 23, the Yale Budget Lab reported that U.S. consumers are now effectively subject to an average tariff rate of 20.2%—the highest level since 1911. Thus far, companies appear to be absorbing much of these added costs rather than passing them on to consumers, though that could change depending on how tariffs evolve and how businesses adapt. (2)
Jobs Report
Fresh economic data released after the Fed meeting showed a weakening labor market, with just 73,000 new jobs created in July. Revised estimates for May and June revealed 258,000 fewer jobs than previously reported. This was the lowest number of jobs added in the US since the peak of the COVID era back in 2020. The new three-month average now sits at just 35,000 jobs per month—well below the historical norm—potentially shifting the Fed’s attention more toward employment and increasing the likelihood of rate cuts, possibly as early as September. (3)
Tax Bill
On Independence Day, President Trump signed a wide-ranging tax and spending bill that permanently enshrines many provisions from the Tax Cuts and Jobs Act, including existing income tax rates and brackets. The legislation brings greater policy certainty for investors and taxpayers but has also reignited concerns about long-term fiscal sustainability.
According to estimates from the Congressional Budget Office, the new law will add more than $3 trillion to the federal deficit over the next ten years. While the legislation includes some spending reductions, these are more than offset by the revenue losses resulting from permanent tax cuts.
Looking Forward…
In the wake of the July jobs report, there are growing concerns regarding economic growth beginning to stagnate. There is also the August 7th tariff deadline which if implemented, would impose reciprocal tariff rates—ranging from roughly 10% up to 41%—on imports from over 60 trading partners. Countries without negotiated agreements will face a default tariff of 10%. Other nations may face higher rates based on trade deficits or failure to reach satisfactory arrangements. After a calm July, the latter part of the third quarter may begin to heat up once again.
Monthly Financial Tip:
Are you staying on top of your receipts? Now, not next April, is the time to catalogue them so you can properly track your deductions and expenses. There are apps that will let you scan receipts with your phone or tablet, with the scans being valid for federal tax documentation.
Citations:
1. Charles Schwab, June 30, 2025
2. Budget Lab, July 23, 2025
3. BLS, August 01, 2025
Disclaimers:
This post has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. Bob Lawson is not engaged in rendering legal or accounting services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
