Cutcher's Investment Lens | 28 July - 1 August 2025

Published: 04 August 2025
Updated: 04 August 2025
3 minute read


Weekly recap

What happened in markets

The Australian sharemarket ended the week lower, with the ASX 200 falling 0.4%. Markets moved in a narrow range overall, hovering just below all-time highs. Investor sentiment was swayed by weak China economic data and tariff headlines from the US. Softer-than-expected inflation data boosted hopes of an August rate cut. Sector performance was mixed, with Consumer Discretionary (1.8%) and Financials (0.6%) leading the gains, while Materials (-2.9%) and Health Care (-1.7%) dragged on the index. Bond yields fell midweek before partially rebounding, helping to stabilise the Australian Dollar after a six-day slide. 

US sharemarkets finished lower last week, with the S&P 500 falling 2.4% as investors grew concerned about slowing US growth following a disappointing July payroll report. Hawkish comments from Fed Chair Powell, who offered no signals of a potential September cut, also added pressure to market sentiment. The earnings season remained in focus, where standouts included Microsoft (+2.3%) and Meta (+5.2%), both buoyed by AI-driven growth. UnitedHealth (-15.4%) and Moderna (-19.2%) fell sharply on cost pressures and macro uncertainty. The US Dollar strengthened against most major currencies. Gold gained 1.5% and oil prices rose 2.2%, while copper tumbled 2.5% amid new trade barriers.

European sharemarkets fell during the week with the STOXX 600 dropping 2.4%, its worst weekly performance since April. Decline was driven by a Friday sell-off triggered by disappointing US jobs data and fresh concerns over new US tariffs. A recently announced EU-US trade framework introducing a 15% tariff on EU imports sparked scepticism, particularly around vague and ambitious EU pledges. Sectors such as Autos (-7.8%), Basic Resources (-5.3%), and Retail (-4.3%) were among the hardest hit. Analysts offer a split view on how interest rate outlooks following the EU-US 15% tariff, where some analysts believe the trade clarity reduces pressure on the ECB to cut rates, while others still expect easing later this year due to subdued inflation and growth risks.

Stock & sector movements 

What caught our eye

Last week, the US Federal Reserve held interest rates steady at 4.25-4.50% for the fifth consecutive meeting. While that wasn’t unexpected, what’s keeping the Fed on hold has raised a few eyebrows.

On the surface, the US economy is showing signs of cooling. Growth in private business and consumer demand has slowed, with June quarter GDP at 1.2%, down from 1.9% in March and 2.5% in the same period last year. The labour market is still holding up, but it’s beginning to show early signs of weakening.

Normally, those indicators would support the case for rate cuts. However, two factors are giving the Fed pause: tariffs and asset markets.

First, the tariff situation. US President Donald Trump has ramped up trade tensions again, announcing new tariffs on copper imports and a steep 50% tariff on Brazilian goods. These moves are expected to push prices higher, at least in the short term, and that’s something the Fed doesn’t want to fuel with a rate cut.

Fed Chair Jerome Powell acknowledged that this inflation may be temporary, but the risk is that it could become more persistent. From his perspective, it’s safer to wait and see rather than act too soon and risk undoing the progress on inflation. This seems contrary to what Powell had originally signalled early in the year, where we believed the Fed would look through one-off price level impacts from tariffs.

Interestingly, not everyone at the Fed agrees. Two governors, both appointed by Trump, dissented from this week’s decision and argued for a cut now. It’s the first time in more than 30 years that two sitting governors have opposed a decision like this, and it highlights how divided opinions are about the right course of action.

The second issue is asset markets. Despite the softer economic data, Wall Street has been performing strongly. Share prices are near record highs, cryptocurrencies are surging, and speculative activity has picked up. Much of the recent momentum has been driven by large technology companies like Meta and Microsoft, both of which reported strong earnings last week and saw their share prices rise sharply in response.

That’s creating a disconnect. While parts of the economy are slowing, financial conditions remain loose, another reason Powell is wary of cutting rates just yet. For us, it’s also an apt reminder of the old saying, “the stock market isn’t the economy”. 

For now, Powell is choosing caution. He’s not ruling out a cut later this year, but it will depend on how inflation and the jobs data look over the next few months. Until then, the Fed is staying put and trying to avoid adding fuel to the fire, despite signs of a cooling economy.

The week ahead

In Australia, an array of economic data is scheduled to be released. We will receive the monthly inflation gauge and monthly household spending indicator among other reports.

Overseas, the Bank of England is expected to cut rates by 0.25% to 4.0% on Thursday. On Wall Street, earnings results for the June quarter are expected to be released for various companies.

China will focus on inflation data scheduled for Saturday, with the Consumer Price Index (CPI) in the spotlight.

Company Reports

 

 

 

About The Author

Wade is the head of the Investment Services division at Cutcher & Neale and has over 10 years of industry experience in accounting and investment advisory roles.

Ryan is our Portfolio Manager, bringing over 15 years of experience in managing multi-asset investment portfolios with a specialisation in fundamental equity analysis.

The information in this publication contains general advice only. It has been prepared without taking your personal objectives, financial situation or needs into account. You should consider whether the information contained within this publication is appropriate for you. Where we refer to a financial product you should obtain the relevant Product Disclosure Statement or offer document and consider it before making any decision about whether to acquire the product.