Markets Eye Policy, Positioning, and Performance

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Happy 4th of August, Traders!

As we head into the new week, here’s a look at what’s on the calendar:

Key Economic Data Releases
Monday:
• Factory Orders (MoM) – June
• Supply: 3-Month Bill Auction, 6-Month Bill Auction
Tuesday:
• Trade Balance (June), Exports (June), Imports (June)
• S&P Services PMI (July), ISM Non-Manufacturing PMI (July)
• Atlanta Fed GDPNow (Q3) – Prelim
• Supply: 52-Week Bill Auction, 3-Year Note Auction
Wednesday:
• German Factory Orders (MoM) – June
• Crude Oil Inventories
• FOMC Member Daly speaks at 11:45 CT
• Fed Governor Cook speaks at 1:00 CT
• Supply: 17-Week Bill Auction, 10-Year Note Auction
Thursday:
• Bank of England Interest Rate Decision
• BoE MPC Meeting Minutes, Inflation Letter, MPC Vote
• BoE Governor Bailey speaks at 8:15 CT
• FOMC Member Bostic at 9:00 CT
• Supply: 30-Year Bond Auction



Crude Oil Update
OPEC+ V8 members have announced an additional 547K bpd unwinding of voluntary cuts. Notably, crude prices have not reacted significantly to the expected OPEC+ figures. As we’ve previously highlighted, the market's focus remains firmly on demand-side factors. Despite geopolitical shocks, trade tensions, and recession concerns, crude oil prices have remained relatively stable—trading within a consistent range for over two and a half years since August 2022. According to Amena Bakr at Kpler, the V8 will meet again on September 7th to potentially reassess the reinstatement of 1.65 million bpd of cuts, currently scheduled to remain in place until the end of 2026.

Earnings Recap
With over half of S&P 500 companies having reported Q2 earnings, YoY earnings growth is now projected at 9.8%, compared to the 5.8% estimate as of July 1, per LSEG data cited by Reuters. More than 80% of reporting companies have surpassed analyst profit expectations—well above the 76% average from the past four quarters.

Macro Outlook
Fed Vice Chair Williams provided further insight into the central bank’s posture ahead of the September FOMC meeting, stating he remains open-minded but continues to believe that modestly restrictive policy is warranted. Williams also emphasized that the notable downward revisions to May and June payrolls were the key takeaway from Friday’s jobs report, reinforcing the theme of softening labor market momentum.
In addition, the Fed announced on Friday that Governor Lisa Cook will resign from the Board effective August 8. A replacement is expected to be named in the coming days, though it is not anticipated to materially alter the policy outlook in the near term.
Looking ahead, if both inflation and unemployment tick higher between now and the September FOMC meeting, it would represent a worst-case scenario for the Fed. The August NFP report due on the first Friday of September and July and August 2025 inflation reports are key data points to monitor before the next FOMC Meeting on September 17th, 2025.
Although equity futures sold off on Friday following a disappointing jobs report, market pricing has adjusted notably. Participants now expect the Fed to deliver three rate cuts in 2025 and two cuts of 25bps each in 2026. This marks a shift from pre-NFP expectations of two cuts in 2025 and three cuts in 2026, per CME FedWatch Tool.


Market Implications:
On the back of rate cut expectations, in our analysis, this may help sustain upside in the equities complex. Although, it may be prudent to adjust portfolio and re-balance strategically according to sectors that may continue to outperform namely tech, AI, defense stocks, commodities and USD per our analysis.