The Davy Digest - 21st July 2025

The White House continues to ramp up pressure on Fed Chair Powell to cut interest rates, although it later backed away from suggestions that it had plans to dismiss Powell. Longer-term yields have risen as markets grow increasingly concerned about the Fed’s independence and its inflation mandate. US inflation climbed to 2.7% in June, suggesting that President Trump’s tariffs are beginning to impact prices. The Fed’s Beige Book, a report that provides a snapshot of the US economy, signalled a slight increase in economic activity from late May through early July while cautioning that inflationary risks may yet return. Consumer sentiment in the US also increased in July, beating expectations. US retail sales were better than expected after two months of declines. Inflation in the Eurozone remained steady at 2%, increasing probabilities for a July rate cut. Meanwhile in the UK, economic data continues to weaken, as both inflation and unemployment figures edged higher. Elsewhere, China’s exports jumped 5.8% in June, while Q2 GDP grew by 5.2%. Tokyo inflation slowed to 3.3% in June, although still above the Bank of Japan’s target rate.

Last week's highlights

	US Inflation (CPI) (15/07) – Climbed to 2.7% in June vs 2.4% in May. Fed’s Beige Book (16/07) – Modestly upbeat vs May but flagged inflationary pressures that may yet resurface. Retail Sales (17/07) – Up by 0.6% month-on-month, above analyst expectations.
	Eurozone Industrial Production (15/07) – Up by 1.7% month-on-month in June following a decline in May. Euro Area Inflation (17/07) – Remained steady at 2% in June.
	UK Inflation (CPI) (16/07) – Unexpectedly rose to 3.6% year-on-year in June, the highest since January 2024. UK Unemployment (17/07) – Rose to 4.7%, the highest in four years.
	China Exports Data (21/07) – Jumped 5.8% in June in USD terms. China GDP (15/07) – Grows 5.2% in Q2, ahead of analyst expectations. Tokyo Inflation (CPI) (18/07) – Slows to 3.3% year-on-year in June, vs 3.5% in May.

Looking forward to this week, Fed Chair Powell will make a speech on Tuesday, closely watched by the Trump Administration and investors for any guidance on future rate cuts. Flash PMI figures will be released in the US, the Eurozone and the UK this week with investors also watching out for consumer confidence levels in both the UK and the Eurozone. The European Central Bank are due to meet on Thursday and make a decision on interest rates which currently stand at 2%. The People’s Bank of China will also meet to discuss its 1 and 5-year Loan Prime Rate, having last cut these rates in May.

What's on the radar

	Fed Chair Powell Speech (22/07) S&P Global US Manufacturing PMI (24/07) S&P Global US Services PMI (24/07)
	Eurozone Consumer Confidence (23/07) ECB Interest Rate Decision (24/07) HCOB Eurozone Manufacturing PMI (24/07)
	S&P Global UK Manufacturing PMI (24/07) Consumer Confidence (25/07) UK Retail Sales (25/07)
	People’s Bank of China Interest Rate Decision (21/07)

Chart of the moment

So Sally can wait 

Source: Bloomberg, Davy as of 21/07/2025. Chart shows historic percentage of time the S&P 500 was higher over various rolling holding periods, using price return data. For example, the S&P 500 was higher 70% of the time using rolling 6 month holding periods going back to 1950.  

• The chart shows the historic probability that the S&P 500 was higher over various holding periods, using S&P 500 data back to 1950. 
• Using 1 year rolling holding periods, the S&P 500 was higher 74% of the time. 
• Since 1950, there hasn’t been a single rolling 20-year period over which the S&P 500 was lower.