Market Note: Broadening Ramps as Jobs Beat

By Hightower Great Lakes on July 7, 2025

New Quarter, No Slowdown

Despite a shortened week due to the holiday, there was lots of activity to digest as we began the third quarter. Last quarter we noted the large dispersion between growth and value securities’ performance, where growth stocks gained ~19% whereas value stocks only returned ~1%.

This difference was the widest margin in 30 years. As the new quarter began, we saw a strong movement in the year-to-date laggards compared to the best performers of the year. The Russel 1000’s worst performers rose by ~2.8%, while the leaders fell by ~1.3%. While the trend seemed to lose steam as the week continued, we will certainly keep monitoring.

Markets drove higher to end the week hitting fresh new record highs, boosted by the U.S. labor market, which continues to chug along despite the uncertainties regarding tariff impacts.

The economy added a stronger-than-expected 147,000 jobs in June, and the unemployment rate ticked from 4.2% down to 4.1%, economists predicting an uptick to 4.3%. Furthermore, last month’s gains, which landed above expectations already, marked a slight increase which was revised to 144,000.

April’s job gains were also revised higher to 158,000 jobs. Those revisions and Thursday’s data bring the three-month average job growth to 150,000 jobs. These numbers solidify what we have been expecting. The negative tariff impacts have been overestimated, and the economy is strong and will remain resilient.

Equities ended the week positively, and the S&P 500 rose by 1.72% and the Dow Jones by 2.3%. As we mentioned earlier, markets saw some rotation out of the second quarter’s top performers, where momentum stocks lagged while value stocks had a positive week. Markets seem to be broadening out.

While technology and industrials have been the leaders year-to-date, financials are quickly rising and consumer discretionary is coming to life. These four sectors account for ~68% of the S&P 500 and can push the index even higher if they continue to ascend. Notably, real estate has been catching steam, and ended the week up 1.51%.

While the strong labor data likely erases the possibility of a Fed rate cut in July, we believe they will cut in the fall. Inflation is still coming down, running at ~2.1%, versus ~9% three years ago. Fed Chair Jerome Powell indicated they would already be cutting if it were not for the tariff uncertainty.

We have gained ~25% since the April low and are now up ~5% this year. But many have not participated in the rally as cash on the sidelines is now at $7 trillion.

Better GDP growth, lower inflation, and the eventual reduction in Fed Fund Futures all provide a nice tailwind for equities to continue to rise. We believe earnings estimates are too conservative and expect these estimates to increase going forward.

Chart 1: U.S. Equity Style Box Performance[1]

Tariff Check

The market remained on alert for trade headlines ahead of this week’s expiration of the 90-day reciprocal tariff pause on July 9. It’s unclear if the 9^th will actually be the day of the pause as Treasury Secretary Scott Bessent also said that this could be pushed until August 1.

The largest development so far has been the announcement of a deal with Vietnam. The deal consists of a 20% base tariff, but 40% on products considered to be transshipments to crack down on the country being used as a conduit for China.

There has also been progress on deals between the European-Union, China and India. President Trump previously indicated that deals are imminent in a multiple of other countries as well. Bessent, this morning said to expect multiple announcements the next two days. We expect trade negotiations to be at the forefront of headlines this week.

Copper’s Silent Rise

Historically, rising copper prices have been a leading indicator of a strong, growing global economy. Copper is a key component in various industries, including construction, manufacturing and technology.

Increased demand for copper, thus higher prices, often reflects increased industrial activity and overall economic expansion. It is used virtually everywhere, in homes and factories, electronics and power generation.

Quietly, year-to-date copper is higher by an impressive 25%. This further enhances our longstanding theme regarding the power of the AI arms race. The race, which is driving economic production through the demand for data center, grid, and overall power expansion.

Development and implementation of AI requires immense processing power, creating to the need for construction of large data centers. Copper is essential for various functions within these data centers, as the metal is ideal for handling significant power demands.

As the AI race continues to heat up, copper has quietly become one of the world’s most strategic raw materials, fueling the exponential growth in AI infrastructure. Copper’s strength this year indicates strong economic growth globally.

Chart 2: Global Copper Demand[2]

Fixed Income

Last week, U.S. Treasury yields experienced a broad sell-off across the yield curve, driven by a stronger than expected June payrolls report.

The US added 147,000 jobs in June with the unemployment rate falling to 4.1%, tempering near-term rate cut expectations and prompting market participants to price out a July rate cut, and shifting focus to September. By week’s end, the 2-, 10-, & 30-year yields were higher by 13, 7 & 3 basis points, respectively.

Over the week, investment-grade spreads tightened 9 basis points to +122 and high-yield spreads narrowed 19 basis points to + 329. Investment-grade and high-yield credit spreads have tightened to levels below those observed prior to ‘Liberation Day’.

During the abbreviated trading week, U.S. credit ratings experienced a net decline, with the major rating agencies reporting 23 downgrades compared to 19 upgrades. High-yield issuers accounted for the majority of the downgrades, comprising 18 of the 23 total rating reductions.

The tax-exempt yield curve steepened last week, with yields at the short end declining 2-4 basis points and yields at the long end of the curve increasing by 3 basis points.

The Week Ahead

Economics – Tuesday: NFIB Small Business Index, Consumer Credit; Wednesday: Wholesale Inventories, FOMC Minutes; Thursday: Continuing Claims, Initial Claims

Earnings –Thursday: CAG, PGR, DAL

Return for Selected Indices^[3]

Click here to read last week’s Market Note (6/30).

Disclosures

Investment Solutions is a group comprised of investment professionals registered with Hightower Advisors, LLC, an SEC registered investment adviser. Some investment professionals may also be registered with Hightower Securities, LLC, member FINRA and SIPC. Advisory services are offered through Hightower Advisors, LLC. Securities are offered through Hightower Securities, LLC.

This is not an offer to buy or sell securities. No investment process is free of risk, and there is no guarantee that the investment process or the investment opportunities referenced herein will be profitable. Past performance is neither indicative nor a guarantee of future results. The investment opportunities referenced herein may not be suitable for all investors.

All data or other information referenced herein is from sources believed to be reliable. Any opinions, news, research, analyses, prices, or other data or information contained in this presentation is provided as general market commentary and does not constitute investment advice. Investment Solutions and Hightower Advisors, LLC or any of its affiliates make no representations or warranties express or implied as to the accuracy or completeness of the information or for statements or errors or omissions, or results obtained from the use of this information. Investment Solutions and Hightower Advisors, LLC assume no liability for any action made or taken in reliance on or relating in any way to this information. The information is provided as of the date referenced in the document. Such data and other information are subject to change without notice.

This document was created for informational purposes only; the opinions expressed herein are solely those of the author(s) and do not represent those of Hightower Advisors, LLC, or any of its affiliates.

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[1] Source: Morningstar, As of July 1, 2025.

[2] Source: The Guardian, As of May 21, 2025.

[3] Source: Bloomberg. As of July 3, 2025.