Bassanese Bites: Earnings support – July 21 2025

US tariff levels inch above market expectations

With markets becoming increasingly numb to Trump’s persistent tariff threats, equities managed to squeeze out a small gain last week thanks to encouraging earnings reports.

Trump made a series of threats last week against Europe and announced a deal that will see Indonesian goods entering the US face a 19% tariff. The latter is consistent with the emerging view that the average tariff level the US sets looks closer to being 15-20%, rather than the 10% baseline originally hoped for by markets. Rumours also swirled (yet again) around Trump’s desire to sack Fed chair Jerome Powell – which still does not seem likely. 

Earnings support stocks

According to FactSet meanwhile, 83% of the 12% of S&P 500 companies that have reported earnings so far have beat expectations. This is a touch above the 5-year average beat of 78%. Perhaps ironically, recent financial market volatility – thanks to tariff concerns – may have helped boost the trading income of several major financial companies, which usually lead off the US earnings reporting season.

Other supportive factors last week were Federal Reserve Board member Chris Waller trying hard to get Trump’s attention – as a possible Powell replacement – by arguing for a July rate cut yet again. To my mind, if anything, Waller’s paper-thin argument for a near-term rate cut is so obviously political it already undermines his economic credibility. But welcome to the new America!

The one key piece of US economic data last week was the June CPI report. Headline inflation rose 0.3%, in line with market expectations, while core prices rose 0.2%, or a little less than expected. Although there were some early signs of tariff effects feeding through into clothing and furniture prices, combined softness in car prices, housing and services helped keep overall price gains limited. 

Outside of the US, Chinese GDP rose a slightly better than expected 1.1% in Q2, despite ongoing tariffs concerns and an ailing property sector. Indeed, as noted by BHP last week, Chinese demand for our key commodity exports remains resilient, reflecting still firm domestic demand and exports.  

Global market trends

Growth and technology had another good week despite the overall US market not outperforming non-US markets. 

The main trend of note over recent months has been the rebound in US/growth/technology relative performance, in line with the market bounce back since early April. Despite the risk-on tone over this period, small caps have refused to outperform so far.