Tariffs, deferred inflation, and geopolitical tensions: a new phase of uncertainty
📎 Read the full analysis from Pictet Wealth Management - July 2025: Weekly Outlook – Will it happen or not?
In its latest weekly note, Pictet Wealth Management highlights a sharp resurgence of political and tariff volatility, which could undermine the upward momentum of equity markets. As a new cycle of macroeconomic data and corporate earnings approaches, investors are questioning the resilience of risky assets in the face of rising external uncertainties.
United States: Trump’s tariff strategy is shaking the markets
President Trump is threatening to impose a new wave of tariffs as early as August 1:
30% on imports from Mexico and the European Union
50% on copper, a critical metal for U.S. industry
This announcement triggered a dramatic surge in copper prices in the United States, widening the gap with European prices. Yet the U.S. economy relies on imports for 50% of its copper supply. According to Pictet, this dependence exposes the industrial supply chain to a lasting loss of competitiveness. Expanding local capacity—in mining and refining—would require several years of intensive investment and regulatory approvals.
Inflation: an impact that remains moderate but could materialize in the short term
So far, the impact of the new tariffs on the Consumer Price Index (CPI) remains modest. However, Pictet economists anticipate a gradual rise in commodity prices over the next two to three months. This could reignite debates over the pace of the Fed’s monetary easing.
The effects are expected to be felt first in industrial inputs and intermediate goods, before spreading more broadly to final consumption.
In this context, the upcoming releases of chain price indices (PPI followed by CPI) will be closely scrutinized by investors.
Any upward surprise could push back expectations for rate cuts and reignite volatility in bond markets.
The minutes of the June FOMC meeting also confirm a cautious stance: committee members believe it is “appropriate to adopt a measured approach” given the persistent uncertainty surrounding inflation and economic conditions.
Technical pullback in equity markets despite record highs
While a tech giant crossed the unprecedented threshold of $4 trillion in market capitalization, the S&P 500 ended the week down 0.3%. This slight decline, occurring just after a historic peak, reflects a degree of technical fragility in a market driven by an extreme concentration of performance around tech megacaps.
According to Pictet, this market dynamic raises two risks:
A lack of sector rotation: outside of AI and a few growth stocks, participation in the rally remains limited.
Increased sensitivity to macro surprises: the slightest shift in inflation, interest rates, or earnings outlook could trigger a rapid correction.
The rise in the yield on 10-year U.S. Treasuries (+7 basis points, to 4.42%) reflects this underlying tension. It signals both expectations of future inflation and a reassessment of monetary policy scenarios. In this context, risky assets remain vulnerable to a tightening of financial conditions, even if only marginal.
Bank Earnings: A Turning Point for Market Sentiment
This week marks the start of the quarterly earnings season in the United States. The major banks—JPMorgan, Citigroup, and Wells Fargo—will kick things off, against a backdrop of high interest rates and credit normalization.
Investors will be paying particular attention to several key points:
Changes in net interest margins, given higher refinancing costs
The rise in loan loss provisions, a leading indicator of a deteriorating credit cycle
Comments on demand for financing, particularly in commercial real estate and SMEs
For Pictet, these earnings reports will serve as a test of the current rally’s resilience. Signs of a slowdown could reignite volatility, particularly if guidance revisions are significant.
Geopolitical instability: three points of tension to watch
Ukraine: a record attack by 728 Russian drones in a single night, in response to the U.S. commitment to increase deliveries of defensive weapons.
Iran: Withdrawal of the last IAEA inspectors, amid a tense diplomatic climate following Israeli-American strikes.
Japan: General elections on July 20. A surge in support for opposition parties, which favor fiscal and monetary stimulus, could destabilize the Bank of Japan’s policy trajectory.
Indicators to watch this week:
United States: CPI, Fed Beige Book, retail sales, University of Michigan consumer sentiment index
Eurozone: ZEW survey (Germany), UK CPI
China: Q2 GDP, industrial production, exports
Japan: Elections and inflation data
The resurgence of trade and geopolitical tensions serves as a reminder of the underlying fragility of the markets. In this context, earnings season and the first macroeconomic readings for July will be key to assessing the sustainability of the rebound seen in the spring.
