Nonfarm Payrolls Slip, Markets Stall

Market Recap: 28 July – 1 August 2025

Financial Markets

US Stock Market

This week the markets stalled after the jobs report. The S&P500 and the NASDAQ 100 lost 2.4% and 2.2%, respectively. The small cap index (Russel 2000) was down by 4.1% and still sits above the 200-day moving average, a short-term support. Trading volumes were above average, especially on Thursday and Friday, showing some real selling pressure.

COMMODITIES

Precious metals continue holding their levels. Gold was up by 0.8% and silver lost 3%. Gold is still close to the previous all-time high and has been in the range 3100-3500$. Silver has been strong lately but if it continues falling, it may re-test the 35$/oz level.

WTI crude oil closed the week at 67$/bbl and the trading range for the near future will likely be 64-71$/bbl.

Bitcoin fell 5% to 118k$, behaving like a leveraged version of the NASDAQ 100, and will likely test the ~108k$.

US DOLLAR, MONEY SUPPLY

The relative strength of the US dollar (DXY) increased slightly to ~98.7. The EUR/USD is around 1.159$, the GBP/USD is at 1.327$, and the USD/JPY is at 147.41 JPY.

US M2 money supply at the date of 30th June 2025 was up by 0.6%, showing a continuous increase in the money supply since December 2023. Banks didn’t stop lending so far – if the money supply was going down, it would be a warning sign for the economy and equities.

The national financial conditions index (NFCI) released on 21st July 2025 loosened by 2.6%. Note that this indicator is delayed by two weeks. Positive numbers in the NFCI mean tighter financial conditions, while negative numbers indicate looser financial conditions.

BONDS AND OPTIONS

US bond yields fell considerably this week. Yields now sit at 3.680% for the 2-year and 4.216% for the 10-year. The yield curve has uninverted since a year ago, and lower yields are expected in the next few years, likely as a consequence of a low growth, low inflation, and short-term interest rate cuts. Long-term growth and inflation expectations remain at ~4.8%.

By the end of the week the VIX jumped to ~20, a level that shows investors are starting to get scared as the overall market remains quite expensive and the risks of a recession mount. Risk premiums in the options market will get even more attractive if the selloff continues.

Comment Section

The US equity markets stalled, as we have been predicting. The evidence is now in the can. The US nonfarm payrolls rose by 73K in July 2025, well below expectations of 110K. The June figure was sharply revised down from an initial 147K to just 14K, while May’s reading was also cut by 125K. Taken together, these revisions show that employment in May and June was 258K lower than previously reported—suggesting the labor market may be cooling more rapidly than the FED had anticipated.

Meanwhile tensions mount inside the FED. Some officials, such as Waller, are already pushing for rate cuts (as much as 1.5%), but the president of the FOMC (Jerome Powell) is still hawkish and afraid of what the tariff policy may do to inflation.

Regarding the tariff war of Donald Trump, the US and the EU have reached an agreement, imposing a 15% import tariff on most EU goods.

The earnings season has begun. Over the next weeks we’ll have a better idea of company’s earnings and outlook for the rest of the year. In general, we believe the odds are on the side of an equity market correction.

Have a nice weekend, and good luck!!!