Investment environment overview, 07/2025

Global equity markets extended their rally for the third consecutive month in July and continued to post new all-time highs. Positive performance was driven by a combination of strong corporate earnings and de-escalation of trade tensions, particularly after the U.S. postponed key negotiation deadlines and made preliminary progress with multiple trading partners. Although momentum moderated towards the end of the month, earnings’ outperformance across several sectors provided a solid foundation for elevated valuations. The S&P 500 and Nasdaq Composite hit new all-time highs on July 28, closing the month up 2.2% and 3.7%, respectively. With the S&P 500 trading at a forward P/E of 22x and the Nasdaq Composite at 29x — levels near their 20-year highs — further upside is likely to depend more on continued earnings growth rather than on valuation expansion.

European equities ended July modestly higher, with the STOXX 600 up 0.9% and the DAX gaining 0.7% (new all-time high on July 9), supported by strong earnings in tech, healthcare, financials, and industrials. European company Q2 earnings are now expected to report improved average EPS growth of 3.1%. Looking at China, the CSI 300 and Shanghai Composite surged 3.5% and 3.7% respectively, fueled by new government infrastructure stimulus, optimism around Sino-U.S. trade talks and a tech-driven rally. Bitcoin posted a new all-time high of above BTC/USD 123,000 on July 14, driven by strong Bitcoin ETF inflows, rising corporate treasury demand, and progress on new U.S. crypto legislation.

Source: Bloomberg and Signet Bank

Tariff update

On July 7, the White House extended the temporary 10% “reciprocal tariff” pause originally set to expire on July 9 through August 1, in a way to provide additional time for trade negotiations. The prior 90-day moratorium had aimed to do just this, but by early July, no major agreements had been finalized, and equity markets interpreted the extension as a mere postponement of tougher tariffs, rather than a sign of progress.

On July 23, the U.S. and Japan reached a bilateral deal. The agreement reduced tariffs on Japanese autos from 27.5% to 15% and capped other tariffs on Japanese goods at 15%, down from the previous 25% level. In exchange, Japan committed to provide USD 550b in investments and loans to U.S. industries. On July 28, the U.S. and EU reached a similar deal that capped tariffs on EU goods at approximately 15%, in return for the EU committing to purchase around USD 750b in U.S. energy and weapons.

On July 31, Donald Trump signed a new executive order finalizing new tariffs set to take effect on August 7. Trading partners were informed of country specific rates ranging from 10% to 50%, along with a 50% tariff on all copper imports. Notably, Indian goods were assigned a 25% rate while Brazilian imports faced a 50% tariff under national security provisions, Swiss products were set at 39%, and Taiwanese exports at 20%. Canada was assigned a 35% tariff on non-USMCA (U.S.–Mexico–Canada Agreement) compliant goods, effective immediately. Following the new executive order, the S&P 500 declined by 1.6% on August 1, while the Nasdaq Composite lost 2.2%.

Even before the new tariffs took effect, their impact was visible. In May, Japan’s exports to the U.S. dropped 11% YoY, while Chinese exports plunged 34% amid U.S. tariffs nearing 45%. The U.K. saw a record 33% MoM decline in April exports to the U.S., worth GBP 2b. Domestically, tariffs boosted U.S. customs revenue to a record USD 28b in June and nearly USD 100b YTD. According to Yale Budget Lab, the average effective U.S. tariff rate has now climbed to 18%, which is the highest since 1934.

Source: Bloomberg and Signet Bank

An exceptional start to the earnings season

As of the time of writing, 66% of the companies in the S&P 500 have reported earnings for Q2. Of these companies, 82% have reported actual EPS above the mean estimate, which is above the 5-year average of 78% and above the 10-year average of 75%. If sustained, this would be the highest share of EPS beats since Q3 2021.

Revenues are also accelerating. Of the reported companies, 79% have reported a positive revenue surprise, which is the highest since Q2 2021. The YoY revenue growth rate is about 6% which is above the 10-year average and the fastest pace since Q3 2022.

The S&P 500’s Q2 earnings are projected to grow at roughly 10% YoY. This is the strongest quarterly profit growth since late 2022 and, if actual, will mark a third straight quarter above 10%. Notably, much of the earnings strength comes from Mag 7 companies, which are expected to deliver 14% YoY earnings growth in Q2.

On the market side, reactions to Q2 earnings have been uneven. Companies beating EPS by modest amounts have seen average price gains (roughly +1% around their report), which are in line with historic averages, while those missing estimates have been punished – averaging a two-day drop of 5.6% (below the 5-year norm of –2.4%). As an example, Intel’s Q2 EPS miss triggered a 11% slide in its share price in the week following the report.

Labor weakness leads U.S. eco data deterioration

U.S. economic indicators have started to weaken again, with recent data confirming that earlier tariff concerns are now materializing. Notably, the highlight of the month was the horrible jobs report where non-farm payrolls added just 73,000 jobs, falling well short of the 110,000–115,000 forecast, while May and June payroll gains were revised down by a startling 258,000 jobs combined. As a result, Trump decided to fire BLS (Bureau of Labor Statistics) Commissioner Erika McEntarfer, who is a Biden appointee, claiming without evidence that job statistics had been “rigged” to discredit his administration.

After the U.S. Q2 GDP growth rate of 3%, the Fed GDP forecast for Q3 now stands at a cooler 2.5%. June’s hard data reflects weak real consumer spending, soft core retail sales, and declining pending home sales. Consequently, the U.S. annual inflation rate continued to tick up for the second month and reached 2.7% in June. Meanwhile, the U.S. manufacturing sector continued to contract in July. The ISM Manufacturing PMI declined to 48.0, down from 49.0 in May and marking the fifth consecutive month of contraction.

On July 30, the Fed decided to maintain the federal funds rate at 4.25%-4.50%, as Fed Chair Jerome Powell continues to stress that inflation is still above 2% target. On July 24, the ECB also decided to keeps rates unchanged at 2.15% for the repo rate and 2.00% for the deposit rate.

Choppy dollar and metals stall

EUR/USD gave back most of its June gains, dipping below our key support zone near 1.1500 before bouncing back to around 1.1600 in early August. This back-and-forth has created a “bipolar” market where short-term moves suggest a possible further dip, but the long-term trend remains bullish. For now, we aim to sell rallies near 1.1650 and buying if the pair falls toward 1.1200, while waiting for a decisive monthly close above 1.1800 or below 1.1200 to contemplate on the next big steps.

July saw limited progress in precious metals: silver reached a key target around USD 40/oz, gold traded sideways, and platinum experienced some profit-taking. Looking ahead, we expect gold to push higher toward USD 3,800/oz, which would support gains in other metals and prompt us to exit gold longs.

Regional Highlights

Aigars Kesenfelds’ family office, JSC ALPPES Capital, received regulatory approval from both the ECB and the Bank of Latvia to acquire up to 29.99% of INDEXO Bank and its pension manager IPAS INDEXO. The investment comes amid a transition period for the bank. While the pension arm remained profitable, the overall group posted a consolidated loss of approximately EUR 4.3m in H1 2025, mostly due to investments in the new bank’s IT infrastructure and operating capital needs. The bank reported a 228% QoQ surge in revenue during Q2, but net fee income remained negative.

Meanwhile in Lithuania, Prime Minister Gintautas Paluckas resigned on 31 July, following waves of journalistic exposés and corruption investigations. Allegations included delayed payment of a EUR 16,500 fine from an earlier conviction and suspicious EU‑funded tenders tied to his family’s businesses. The entire cabinet resigned, and Finance Minister Rimantas Šadžius now serves as acting PM.