July 2025 highlights

And the Healing Has Begun: The rally from the Liberation Day–induced lows has been nothing short of stunning. What started as a fundamental clipping of the crisis left tail has given way to a technically fueled pain trade driven by slowly recovering sentiment and re-risking by institutional investors and systematic strategies. There may yet be more fuel to power the pain trade higher, but the seeds are being sown for a potential growth startle as the bullish narrative gets crowded and growth fears continue to emerge.

Blue Money: Chatter around the “Sell America” trade has faded as US equities have ripped to new all-time highs, and as the data has slowly come in, the evidence has grown to suggest that it was largely a trade in name only. US Treasuries were ground zero for fears of foreign selling, and while April did see US Treasury holdings of foreign investors decline modestly, there simply isn’t any evidence of broad and sweeping capital flight.

Brand New Day: Asset performance itself has also poked holes in the existence of the Sell America trade. Since Liberation Day, the S&P 500^® has advanced 10.8% while European equities are 11% higher. But the modest European outperformance has been driven almost exclusively by currency return. In local terms, Europe is up just 3% against positioning, and a consensus call that is growing increasingly crowded in expecting further dollar weakness. US equities look likely to reclaim leadership in the second half of the year should the FX tailwind subside.

Into the Mystic: After a brief run of superior earnings revisions in Europe relative to the US, the trend has reversed in favor of the US once again. Relative earnings revisions have been tightly correlated with relative performance between the two regions. Should the dollar stabilize to strengthen modestly as slower growth and a stronger euro begins to filter through to slower top- and bottom-line growth, Europe looks likely to resume its role as a laggard.

Domino: In the wake of a stronger-than-expected jobs report for June, investor fears of an imminently weakening labor market have calmed, given healthy headline payrolls growth and a material move lower in the unemployment rate. But under the relatively benign headline figures, the details continue to point to a linearly cooling labor market. The percentage of workers seeing zero wage growth rose to a new cycle high in June, suggesting the risk for unemployment remains skewed to the upside. The risk is growing that the unemployment rate is overstating the degree of health in the labor market.

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