On August 6th, 2025, Elaine and Scott hosted their Mid-Year Economic Update webinar. Every summer, they share clear, data-driven information, free of bias so that our clients can see exactly where the U.S. economy stands and what it could mean for you. With simple charts, down-to-earth language and our commitment to unbiased objectivity, it is our goal to give you this valuable information in a clear and easy to understand format, from a source you can trust. We recorded the webinar and you will be able to watch it in its entirety by scrolling to the bottom of this article.
In this blog, we will discuss the following.
- Tariffs
- Inflation
- Federal Reserve and Interest Rates
- Housing Market
- U.S. Economy
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Tariffs
The news about tariffs the U.S. is placing on imports from other countries is changing every day. Here are a few highlights of the current status.
Source: Import data from the United States Census, 8/1/2025
We are following the tariffs closely and looking at how they are impacting the economy, and possibly the stock market.
The Trump Administration has negotiated trade deals with the following countries.
Source: Import Data from the United States Census, 8/1/2025
Adding the numbers above, the countries and regions listed have signed trade agreements that account for 44% of all imports into the United States.
The countries that import the most goods to the U.S. are Mexico and Canada. On July 31, 2025, Mexican President Claudia Sheinbaum announced that trade talks were ongoing between the U.S. and Mexico. She also announced there would be a 90-day extension before applying tariffs, so there was more time to allow the negotiations toward a trade deal to come to fruition.
Canada and the U.S. have taken a more adversarial approach. A 35% tariff was announced for Canada, starting August 7th. Reports in the media are that talks between the two countries are expected to take place soon.
Inflation
With the addition of tariffs on U.S. imported goods, there has been much speculation in the media that the tariffs could cause inflation.
CPI: 12-month percent change for All Urban Consumers, not seasonally adjusted
Source: U.S. Bureau of Labor Statistics
From the graph above, we can see that inflation has been rising slightly over the past couple of months, but it has not increased as much as has been predicted by many in the media. We will see over time if inflation is being driven up by tariffs or if inflation starts to trend back downward.
Federal Reserve and Interest Rates
The U.S. Federal Reserve met on July 30th and 31st. The message from Chairman Jerome Powell is that they are looking at the risk of inflation rising (which would make them want to leave the rate unchanged) versus the economy weakening (which would make them want to reduce interest rates). After the meetings wrapped up, Jerome Powell announced the Federal Reserve will keep interest rates unchanged at this time. The next meeting of the Federal Reserve is September 16-17. The CME FedWatch website (https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html) is currently showing an 89% chance that the Federal Reserve will lower interest rates by 0.25% in their next meeting in September.
Housing Market
The interest rate of a 30-Year fixed rate mortgage has a large influence on the affordability of buying a home. The interest rate has remained high for about 2 years.
30-Year Fixed Rate Mortgage Average in the U.S.
Source: Federal Reserve Bank of St. Louis
The interest rate is currently about 6.7%. The expectation is that if the Federal Reserve lowers interest rates over the next year, the interest rate on the 30-year fixed rate mortgage will also come down.
Even with the relatively high mortgage interest rate, the prices of homes across the U.S. have remained high.
U.S. Median Home Price
Source: Redfin
One factor contributing to keeping home prices high is that current owners are unwilling to sell their home because their existing mortgage has a low interest rate. If they sold and bought a new home, they would have to get a new mortgage at a much higher rate.
U. S. Economy
Let’s look next at several of the key measures of the U.S. economy. The number of job openings in the U.S. has remained about the same for the past year.
Source: Federal Reserve Bank of St. Louis
With the number of job openings above 7 million jobs (shown in the graph above), unemployment has remained relatively low, at 4.2% (shown in the graph below).
Source: Federal Reserve Bank of St. Louis
There may be very early signs that the job market is starting to weaken. Here are some recent headlines in the news.
A.I. is Wrecking an Already Fragile Job Market for College Graduates, July 29, 2025 Wall Street Journal
U.S. Job Growth Stalls: Just 73,000 Jobs Added in July with "Stunning" Downward Revisions in RecentMonths August 1, 2025, CNBC
Contentious July Jobs Report Confirms the U.S. Economy is Slowing Sharply August 4, 2025, CNN
We are keeping a close eye on the jobs market as it could be an early warning sign of a weakening economy.
Next, let's look at the health of the consumer and personal consumer expenditures.
Source: Federal Reserve Bank of St. Louis
Consumers are spending at record levels. Our informal observations of full airline flights, shopping malls and restaurants seem to confirm this. As long as employment rates are high, most Americans seem to keep spending.
Another important measure of the health of the economy is the Gross Domestic Product (GDP). This is a measure of the total consumption in the U.S. The number for Q2 (April, May, June) was just announced and GDP grew at a very healthy 3.0% over the previous quarter.
Finally, let’s look at corporate earnings for the S&P 500 companies. Earnings for these companies were at a record level in Q2. 83% of the S&P 500 companies reported earnings that beat estimated earnings. These are very strong earnings numbers.
To summarize the state of the economy,
- Job openings: remain relatively high at over 7 million jobs
- Unemployment: relatively low at 4.2%
- Personal consumer expenditures: record high level
- GDP: grew 5% from Q1 to Q2 in 2025
Key Takeaways
We see a relatively even balance between headwinds (pushing upward) and tailwinds (downward) for the U.S. economy and stock market.
The headwinds include the following.
- Initial signs of rising unemployment
- Uncertainty due to tariffs
- Unsustainable U.S. Federal Government spending
- Expensive U.S. Stock Market, currently at an all-time high
The tailwinds are the following.
- The economy remains strong (for the reasons shown above)
- Since early April, investors continue to "buy the dip" in the U.S. stock market
Moving forward, we will closely watch the news regarding tariffs to see if they start to have an impact on inflation or consumer spending. Historically, August and September can be weak months for the stock market, so we will be watching for signs of this. Also, we will be monitoring the news from the Federal Reserve to see if they decide to cut interest rates in September and possibly again later in the year.
The year is more than half over and it has been a year full of headlines. We are keeping a close eye on the news, so you do not have to. 😊 We want our clients to know that we are actively managing your investments, and we will make adjustments as necessary to navigate through an environment filled with major news stories on a daily basis. If you want to discuss how all this may affect your portfolio, contact your Wealth Manager at Financial Journey Partners.
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