Stock Market Outlook – August 03 2025

Stock Market Outlook entering the Week of August 3rd = Uptrend

• Average Directional Index: Neutral
• Institutional Activity: Uptrend
• On Balance Volume: Uptrend

ANALYSIS
The stock market outlook remains in an uptrend for U.S. equities, although high volume selling and bearish bias shifts are cautionary signs.

The S&P500 ( $SPX ) fell 2.4%.  The index sits ~2% above the 50-day moving average and ~6% above the 200-day moving average.

The ADX directional indicators are on the verge of a cross-over (i.e neutral), but the other two signals remain bullish entering the week.

SPX Price & Volume Chart for Aug 03 2025

PERFORMANCE COMPARISONS
The Utilities sector ( $XLU ) was the only gainer last week; Materials ( $XLB ) led to the downside. Consumer Discretionary, Energy, and Financials ( $XLY, $XLE, $XLF ) downshifted to neutral bias, while Staples, Healthcare, Materials, and Real Estate ( $XLP, $XLV, $XLB, $XLRE ) all dropped to bearish.

S&P Sector Performance from Week 31 of 2025

All sector styles were lower last week; Momentum ( $MTUM ) escaped with the least damage, while Small Cap Value ( $IWN )  was hardest hit.  Low Beta, Small/Mid/Large Cap Value, and High Dividend ( $SPLV, $IWN, $IJJ, $IWX, $SPHD ) fell to neutral bias.

Sector Style Performance from Week 31 of 2025

Oil ( $USO ) outperformed other assets and Bitcoin ( $IBIT ) underperformed. Oil, gold, and bonds ( $USO, $GLD, $IEF ) all returned to bullish bias, and the U.S. dollar ( $DXY )  improved to neutral.

Asset Class Performance from Week 31 2025

COMMENTARY
U.S. equities weren’t a fan of the macro data dump.  June job openings (JOLTs) fell slightly and missed expectations, but not by much.  The first Q2 GDP estimate came in at 3%, which is unchanged year over year, but above expectations and significantly better than last quarter’s read.

So it’s not all that surprising the FOMC held rates steady, citing a low unemployment rate, somewhat elevated inflation, and persistent uncertainty about the economic outlook (i.e. impact of tariffs).

The subsequent PCE data release showed inflation rising in June (on a year over year basis), and that’s after an upward adjustment of 0.2% to May’s Headline and Core figures.

We continue to see a pattern of prior core and headline PCE data revised higher the following month…not enough to influence policy, but certainly enough to start asking questions.

Enter July Non-Farm Payrolls.  Friday’s NFP data showed an increase of 73,000 jobs in July, well below expectations of 110,000. Not great, but not awful either. The report also revised June and July figures as well:

• June payroll data was lowered from 147K to 14K ( -90% )
• May payroll data was lowered from 144k to 19k ( -87% )

Those are massive revisions, and points out a weaker labor market than the one used to set policy.  Granted, NFP is just a directionally correct estimate, derived from small surveys and models each month.  But even the higher accuracy, lower speed data (Quarterly Census of Employment and Wages or QCEW) shows a growing rift with NFP estimates, which all suggests that even “directionally correct” may be a stretch.

So what’s a safe investor supposed to do?  Watch asset prices and use fundamental/macro data as confirmation.  The breakout in bonds (i.e. rates down) and the U.S. dollar is a deflationary signal, but equity indexes are still bullish.

In the meantime, when sectors, styles, or asset classes downshift into bearish bias, it’s time to adjust their respective position sizes.  At the very least, dropping the position to your minimum size is warranted, while exiting the position all together is a safer play, especially if the ticker covered by more than one category (e.g. $XLP and $SPLV).

Best to Your Week!

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Sources: Bloomberg, CNBC, Federal Reserve Bank of St. Louis, Hedgeye, Stockcharts.com, TradingEconomics.com, U.S. Bureau of Economic Analysis, U.S. Bureau of Labor Statistics

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