Last Week on Wall Street – August 1st, 2025

S&P 500: 2.48% DOW: 1.39% NASDAQ: 3.88% 10-YR Yield: 4.28%

What Happened?

Markets shook off the prior week’s jitters and came roaring back, with investors hunting down fresh record highs. What started as lingering caution after soft labor market revisions quickly turned into a buying spree, fueled by a potent mix of strong earnings and renewed rate-cut optimism. It seems high valuations and persistent macro noise are doing little to cool risk appetite.

Tech led the charge, with the Nasdaq climbing nearly 390 bps, powered by standout results from names like Palantir, Shopify, and Apple. The S&P 500 and Dow weren’t far behind, both posting solid weekly gains as broad participation extended beyond mega-cap tech into financials and industrials.

On the macro front, President Trump’s nomination of Stephen Miran to the Fed Board stirred speculation of a more dovish tilt ahead of September’s meeting. Global headlines added texture, European equities logged their best week in three months, while Indian markets buckled under the weight of surprise 50% U.S. tariffs.

For now, earnings momentum and the prospect of looser monetary policy are overpowering concerns about stretched valuations, tariff tensions, and geopolitical risks. In other words: Wall Street’s appetite for upside remains alive and well.

July 2025 Services ISM

ISM nonmanufacturing PMI slipped to 50.1, below expectations.
Business activity and new orders continued to expand, with indexes of 52.6% and 50.3% respectively, but both showed a slower rate of growth than the previous month.
The Employment Index at 46.4% was in contraction territory for the second straight month, indicating continued difficulty in hiring, while the Prices Index rose sharply to 69.9%, its highest level since October 2022.

The key takeaway – The Services PMI index indicated a slowdown in July, falling to 50.1%, barely above the expansion threshold of 50%. At the same time, prices paid by services companies hit a near-three-year high, and employment went down for the second month in a row.

This slowdown reflects some challenges in the economy. Inflation, for example, remains a serious issue for service businesses, as the Prices Index reached its highest level since October 2022.

For investors, the mix of slowing economic growth and rising prices points to a difficult scenario, not seen since the “stagflation” of the 1970s. The effects of this slower growth and fewer jobs could begin to appear in third-quarter corporate earnings. Companies might see their profits squeezed from two sides: falling demand from careful consumers and higher costs from tariffs and inflation.

This uncertainty and the risk of lower profits may make investors wary about stocks, especially in industries that rely heavily on international trade and have changing costs, such as retail and agriculture. A stagflationary environment also puts the Federal Reserve in a tough position as it tries to fulfill its dual mandate of maximum employment and stable prices. While slowing growth would typically prompt a rate cut, rising prices may keep them from doing so, adding to market uncertainty.

Big changes could be coming to your 401(k)

An executive order has been signed allowing 401(k) plans to include alternative assets such as private equity, private equity, and cryptocurrency.
This change marks a shift from the traditionally conservative, public-market focus of most retirement plans.
Actual adoption will depend on regulators, plan sponsors, and product providers, so the impact won’t be immediate.

The key takeaway – Plan sponsors have avoided private market investments not because they’re banned, but because their fiduciary duty requires offering prudent, reasonably priced options to participants. Before this potential permanent change, the average 401(k) plan has largely stuck to a small menu of employer-selected mutual funds focused on public stocks, bonds, and cash equivalents. Opening the door to private market assets could give everyday retirement savers access to a massive and fast-growing part of the economy like private equity and private credit that’s traditionally been reserved for institutional investors or individuals with self-directed brokerage and wealth management accounts. With private markets now holding trillions in assets and much of corporate growth happening before companies go public, this shift could let savers tap into opportunities that have become an increasingly important driver of long-term returns.

On the flip side, adding higher-risk assets like private equity and crypto could bring greater volatility, illiquidity (though that’s less of a concern in long-horizon retirement accounts), and the potential for significant losses. These investments also tend to come with higher fees, especially in retail-friendly formats, which can chip away at returns and make it harder for the average investor to fully grasp the risks involved.

Trump’s sweeping new tariffs take effect against dozens of countries

Sweeping new tariffs on more than 90 countries around the world have come into effect.
The overall average effective tariff rate rose to more than 17% – the highest since 1935.
The tariff rate for India was hiked up to 50% over their purchases of Russian oil

The key takeaway – On Thursday, sweeping tariffs on more than 90 counties officially took place after months of delays. This move represents a strategic shift in U.S trade policy, as the administration is not just using the tariffs as a source of profit, but also as a tool to achieve political and foreign policy objectives.

For investors, the unpredictable nature of the tariffs and the resulting economic uncertainty are major factors to consider. Many businesses are already feeling the pinch, reporting significant profit hits and delaying long-term investment decisions. This is causing a scramble among companies to either reconfigure their supply chains to reduce tariff costs or to eat the additional costs. While markets have been resilient, mostly driven by strength with large cap AI stocks and the tech sector, the long-term economic outlook is far from clear. The rising risk of stagflation and uncertainty surround further tariff escalations mean investors should remain vigilant and may need to adjust their strategies to focus on domestic-oriented businesses that are less exposed to the volatility of international trade.