Key Points: Overview

• Markets paused in July after a strong first half of the year.
• Inflation continues to ease but remains higher than the Fed’s target.
• Political developments, including new tariffs, are adding to market uncertainty.
• Investors are favoring more defensive strategies like short-term bonds, minimum volatility equity, and gold.
• Long-term trends like AI, infrastructure, and global diversification remain strong areas of opportunity.

Introduction

July marked a turning point. After months of upward momentum, markets paused as inflation remained sticky, rate cuts were delayed, and President Trump signed sweeping legislation. Known as the “One Big Beautiful Bill Act,” this law made major changes to taxes, spending, and trade, including tariffs and estate tax breaks. These developments prompted investors to rethink risk, revisit core strategies, and stay alert to both near-term disruptions and long-term opportunities.

Market Overview

U.S. stocks pulled back slightly in July. While the S&P 500 may have dipped after the curve of new tariffs and revised guidance from companies navigating higher costs, it seems to have made a comeback. Investors were cautious, shifting into cash and short-term bonds. International markets, particularly in Asia and Europe, showed more resilience as trade tensions had uneven effects worldwide.

On the bond front, yields remained attractive and stable, especially for short-term Treasury bonds hovering around 4.3%. Meanwhile, gold and alternatives saw more demand, as investors looked for safety and a hedge against policy surprises.

Key Changes in the Macroeconomic Landscape

The “One Big Beautiful Bill Act” introduced sweeping measures that are already affecting the market. High-income earners and businesses benefit most, with extended deductions, higher estate tax exemptions, and trade protections favored by ownership structures. However, cuts to federal programs like Medicaid, SNAP, and housing protections might weaken broader economic support.

Tariffs on Chinese imports were also reinstated under this law, raising concerns about rising costs and supply chain disruptions. This has led companies to rethink their production strategies and delay capital investment.

Meanwhile, inflation cooled slightly in July, but core services remain expensive. With just one or two rate cuts expected by year-end, the Fed is taking its time. Higher business costs and slowing earnings, driven partly by policy shifts, are reinforcing a cautious market tone.

Strategic Themes Outlook

Given the uncertain climate, we’re leaning into strategies that mix safety with select growth. For equity, low-volatility and dividend-focused funds are gaining favor, offering steady performance in choppy markets. Fixed income portfolios now lean on short-duration, high-quality bonds, which offer good yields without locking in long-term rate risk.

Alternative assets like gold continue to provide diversification in an unpredictable policy environment. The “One Big Beautiful Bill Act” makes these hedges particularly relevant, as shifts to spending and tax dynamics may impact inflation and currency.

At the same time, our longer-term themes remain strong. AI, infrastructure, energy, and reshoring are backed by global demand and government support. Internationally, Japan remains in focus due to reform-driven momentum and favorable valuations. Emerging markets may also benefit as trade patterns shift away from China.

Conclusion

July showed us that markets can change quickly when politics, policy, and inflation combine. The key takeaway? Balance: mixing defensive positioning with exposure to long-term ideas. Our approach is steady: build resilient portfolios, preserve capital, and stay prepared for what comes next.

We’re here to help you navigate these changes and align your strategy with your goals. Let us know if you’d like to review your portfolio or talk through these updates.

– Zenith Wealth Partners

Sources:

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• Financial Times. (2025). Japan equity reform attracts U.S. capital. https://www.ft.com
• Harvard Business Review. (2025). Portfolio strategy in high-correlation environments. https://www.hbr.org
• Investment Company Institute. (2025). Weekly money market fund flows. https://www.ici.org
• McKinsey & Company. (2025). The new trade order: How companies are adapting. https://www.mckinsey.com
• McCabe, C., & Ge Huang, V. (2025, June 16). Stock Market Today: Dow Futures Rise; Israel-Iran Conflict Enters Fourth Day. The Wall Street Journal. https://www.wsj.com/livecoverage/stock-market-today-trump-tariffs-trade-war-06-16-2025
• Trading Economics. (2025). Japan stock market index (JP225). https://tradingeconomics.com/japan/stock-market
•  OECD. (2025). Economic Outlook – Spring 2025. https://www.oecd.org 
• Voronoi. (2025, July 17). S&P 500 market cap reaches all-time high of $56 trillion. https://www.voronoiapp.com/markets/-SP-500-Market-Cap-Reaches-All-Time-High-of-56-Trillion-in-July-17-2025-3005

All written content is for information purposes only. Opinions expressed herein are solely those of Zenith, unless otherwise specifically cited. Material presented is believed to be from reliable sources and no representations are made by our firm as to another parties’ informational accuracy or completeness. All information or ideas provided should be discussed in detail with an advisor, accountant or legal counsel prior to implementation.