A black swan named Trump
The past week turned out to be surprisingly eventful and full of intrigue. Unfortunately, it began on a high note but ended on a low one.
The week started with the S&P 500 and NASDAQ Composite hitting fresh all-time highs, alongside the ITS World (ITSW) and ITS Shariah (ITSS) indexes. It seemed that the rally, ongoing since early April, was set to continue. Of course, investors knew deep down that trees don’t grow to the sky – a pause was inevitable. Still, sentiment at the start of the week was broadly positive.
And there was every reason to believe it would remain so. The U.S. Federal Reserve’s FOMC meeting on Wednesday went as expected, and quarterly earnings from the ‘Magnificent Seven’ tech giants largely met forecasts. Following its Q2 results, Microsoft (MSFT) hit a market capitalisation of $4 trillion, joining NVIDIA (NVDA) in the exclusive “four-trillion club”. By midweek, gains had slowed somewhat, likely due to short-term overheating.
But then Friday brought trouble from an unexpected source – the labour market. On Wednesday, preliminary employment figures from ADP looked reassuring and gave no cause for concern. That made the official July data from the U.S. Bureau of Labor Statistics (BLS) all the more shocking.
Worse still, not only were the new figures disappointing, but June’s numbers were revised downward as well. For many, it was a bolt from the blue. And in a dramatic reaction, President Trump intervened personally – abruptly dismissing the head of the BLS, an institution with an impeccable global reputation. His accusation of data manipulation marked the final outburst in what was clearly an emotional response.
Trump has since announced he will appoint a new BLS director in the coming days. Whether this will be an independent statistician focused on providing accurate data, or a loyalist aiming to please the president, remains to be seen.
Understandably, markets reacted nervously. A broad sell-off followed, with heavy volumes pushing down leading stocks and indexes alike. The climb toward new highs was halted, and the week ended in firm decline: the NASDAQ Composite lost 2.17%, the Dow Jones Industrial Average (DJIA-30) fell 2.92%, and the S&P 500 dropped 2.36%. ITS indexes were also caught in the downturn: ITS World (ITSW) fell 3.06%, and ITS Shariah (ITSS) slid 2.17%.
Sector performance also painted a bleak picture: 10 out of 11 ended the week in negative territory. Only utilities managed gains, with an average rise of 1.07%. The steepest losses were seen in Consumer Cyclical (-4.66%), Basic Materials (-4.63%) and Health Care (-4.5%). The sell-off in health care was particularly frustrating. Align Technology, Inc. (ALGN), a dental equipment manufacturer, was the S&P 500’s worst performer. After issuing a downbeat forecast, its shares plunged over 30% intraday and finished the week down 32.72%.
The materials sector was also hit hard – particularly copper producers. President Trump’s announcement of 50% tariffs on copper pipes and wire triggered a wave of selling. Albemarle Corp (ALB) fell 19.81%, while sector leader Freeport-McMoRan Inc (FCX) dropped 10.19%.
So the market turned lower. Whether this marks a temporary correction or the start of a broader trend reversal is not yet clear. For medium- and long-term investors, now is not the time for drastic moves. One day of selling does not justify panic. But caution is warranted – August has a well-earned reputation as a volatile month for markets.
Market outlook for 4 august 2025
Monday morning feels far more reassuring than the anxious close to last Friday. Investors appear to have digested the labour market jitters and concluded that the devil is not as black as he is painted – there may be little cause for serious concern. Especially since the quarterly earnings of leading U.S. companies continue to show strong and steady momentum.
At this point, more than half of the companies in the S&P 500 have reported their results. According to LSEG (as cited by Reuters), second-quarter earnings are expected to grow by 9.8% year-on-year – well above the 5.8% forecast as of 1 July. Over 80% of reporting companies have exceeded analyst expectations, compared to an average of 76% over the past four quarters.
As a result, sentiment improved markedly over the weekend. On Monday morning, futures for the major U.S. indexes were firmly in the green, gaining more than half a percent compared with Friday’s close.
The coming week is expected to be relatively quiet: no major macroeconomic data releases are scheduled, and the earnings season is gradually drawing to a close. The peak of the summer holiday period is also dampening market activity.
This time, the main source of volatility is likely to come from politics rather than economics. News from the White House and developments on the trade war front will have a direct impact on prices. Hopefully, the news flow will not be overly intense – after Friday’s shock, the market needs some breathing room to make sense of events and assess the direction of travel.
In terms of scheduled updates, corporate earnings will continue to trickle in – and there are still plenty of companies left to report. On Monday, right after the closing bell, investors will see results from one of this year’s standout performers: Palantir Technologies Inc. (PLTR), whose shares have gained more than 100% since January.
On Tuesday, before the opening bell, results are due from industrial heavyweight Caterpillar (CAT) and global pharmaceutical leader Pfizer (PFE). Later in the day, attention will shift to one of the key players in the tech sector – Advanced Micro Devices (AMD).
Also reporting this week are the king of burgers, McDonald’s (MCD), media giant Walt Disney Co (DIS), and major pharmaceutical firms such as Eli Lilly & Co (LLY) and Gilead Sciences, Inc. (GILD).
In short, those who haven’t gone on holiday will have no shortage of things to watch. Let’s hope last Friday’s nightmare doesn’t repeat itself and that the coming days unfold in a calmer – and preferably more positive – fashion.