Trade tensions have resurfaced. President Trump has announced a new round of tariffs: a 35% tariff on Canadian imports and 30% on goods from the EU and Mexico—set to take effect if no new trade agreements are reached. Some of these measures have already started rolling out as of August 1, with exceptions made for certain countries like China and Mexico, suggesting progress toward future deals. A 10% baseline global tariff now appears to be a permanent part of U.S. trade policy.

 

So far, the U.S. has collected over $99 billion in tariff revenue, more than double the amount from last year.

 

Consumer credit increased by $5.1 billion, and loan delinquencies are trending higher.

• Credit card delinquencies hit 3.05%, up significantly from the lows of 2021.

• Auto loan delinquencies reached 5.1%.

• Even the wealthiest ZIP codes are showing strain, with 8.3% of credit card debt in delinquency—up from 4.8% in 2022.

 

While this doesn’t necessarily mean a wave of defaults is coming, it does signal that more households are under pressure. Given the consumer’s importance to the U.S. economy, this is a trend to watch closely.

 

The Fed chose to keep interest rates unchanged in July. However, two board members dissented—favoring a 0.25% rate cut, marking the first such disagreement among Governors since 1993. The economy is clearly in a delicate place, and future policy may shift quickly if conditions change.

 

After reaching record highs earlier this year, markets paused in July amid rising trade concerns. However, the broader picture remains resilient:

• Dow: +3.7% YTD, -1.1% for July, +9.6% year-over-year

• Nasdaq: +9.4% YTD, +3.4% for July, +25.9% year-over-year

• S&P 500: +7.8% YTD, +2.1% for July, +18.6% year-over-year

 

Volatility defined the consumer discretionary sector this year. After falling 13.8% in Q1, it rebounded 15.6% through late July, fueled by stronger economic growth and clearer trade guidance.

 

Still, the sector is slightly negative YTD (-0.39%), outperforming only Health Care, which is down -1.42%.

 

As of this writing, 315 companies in the S&P 500 have reported second-quarter earnings. Results are encouraging:

• Earnings are coming in at $65.90 per share (vs. $64.65 expected)

• 82.2% of companies beat estimates

• Just 13.3% fell short

 

Job growth came in below expectations:

• July non-farm payrolls rose just 73,000 (vs. 104,000 expected)

• Revisions to prior months showed even weaker trends

• The unemployment rate ticked up to 4.2%

• Labor force participation fell to 62.2%, the lowest since late 2022

 

This cooling in employment may limit consumer strength, but it also increases the likelihood of future rate cuts by the Fed.

 

Eurozone inflation hit 2% year-over-year—slightly higher than the 1.9% consensus. While modest, this could affect the timing and extent of European Central Bank rate moves.

 

⸻

 

While risks remain—from trade tensions to a slowing labor market—the U.S. consumer remains a cornerstone of economic stability. So far, earnings are strong, inflation is under control, and the Fed is signaling caution. This backdrop supports the case for staying invested and disciplined.

 

Markets may wobble in the short term, but the long-term case for owning quality businesses remains intact.

 

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