Financial Markets 22/07/2025
The Q2 2025 earnings season has begun, and so far, financial markets appear to be taking it in stride. In fact, the past week left markets virtually flat, with only a slight narrowing of the gap between U.S. and European indices.
Both the S&P 500 and Nasdaq 100 reached new all-time highs during the week, but their weekly gains were modest at +0.6% and +1.5%, respectively. Meanwhile, the Eurostoxx 50 declined by -0.45%, bringing its year-to-date return to 9%, now only slightly ahead of the S&P 500, which is up +7.1% in 2025.
In fixed income, yields on major international bonds fell in parallel. The 10-year U.S. Treasury yield dropped by 6 basis points to 4.38%, while the German Bund and Spanish bond yields fell by 8 basis points, closing at 2.65% and 3.26%, respectively. The U.S. yield curve flattened, with short-, medium-, and long-term rates converging around 4.30%, indicating that markets are currently pricing in fewer interest rate cuts by the Federal Reserve. For example, 3-month, 1-year, 8-year, and 10-year bonds are all yielding around 4.30%.
As mentioned, last week marked the start of H1 earnings season. This is a highly anticipated period, as analysts seek to assess whether geopolitical instability, Trump’s tariff policies, and the Fed’s reluctance to adjust rates are impacting the real economy. In the U.S., consensus forecasts expect a strong ~10% YoY EPS growth, though this is skewed: the so-called “Magnificent 7” are expected to grow around 14%, while the rest of the index is projected to grow just over 3%. Last week, American Airlines and Netflix—two index heavyweights—reported earnings. Despite beating expectations, American Airlines ended flat and Netflix closed lower, suggesting that markets had already priced in strong results.
This week, key companies reporting include Coca-Cola, General Motors, Tesla, Google, IBM, and Intel.
On the macroeconomic front, the U.S. released June CPI data, showing a 2.7% YoY increase in headline inflation and 2.9% in core inflation. A breakdown by product/sector suggests that while some goods are already feeling the impact of tariffs, the effect remains modest—implying that further price increases may be on the horizon. This may be the key factor holding the Fed back from cutting rates, despite pressure from Trump.
This week’s key data releases include the Conference Board Leading Index, U.S. and Eurozone housing sales, and Germany’s IFO index.
Quote of the Week:
We close with a quote from American writer and philosopher Henry David Thoreau:
“The price of anything is the amount of life you exchange for it.”
Summary of Key Financial Asset Performance (as of July 21, 2025)
This report does not constitute personalized financial advice. It has been prepared independently of the specific financial circumstances and objectives of its recipients.
Prepared by Portocolom Agencia de Valores S.A., this document is intended to provide general information as of the date of issuance and is subject to change without notice. Portocolom assumes no obligation to communicate such changes or update the content. Neither this document nor its contents constitute an offer, invitation, or solicitation to buy or subscribe to securities or other instruments, nor should it serve as the basis for any contract, commitment, or decision.
The information herein has been obtained from public and reliable sources. While reasonable care has been taken to ensure its accuracy at the time of publication, no representation is made as to its completeness or accuracy. Portocolom accepts no liability for any direct or indirect loss arising from the use of this information. Past performance is not necessarily indicative of future results.