Market Update – August 2025

1. The Big Picture: What’s Changed Since July?

The cross-currents of policy and economic data intensified as we moved into August. The market is now digesting implemented tariffs and another month of stubborn inflation, creating a more complex landscape than we saw in Q2.

Indicator (latest read)	Direction	Why It Matters
US-EU/Mexico Tariffs	↑	The threatened 30% blanket tariff on many goods was implemented on August 1st after talks failed to produce a last-minute deal.
July CPI (released Aug 12)	↑ to 2.9%	Inflation accelerated slightly again, cementing fears that price pressures are becoming entrenched despite a slowing economy
10-Year Treasury Yield	↑ to 4.65%	The bond market is demanding higher returns to compensate for persistent inflation and the deluge of new government debt.
Q2 Earnings Season	→ / ↓	Most companies beat lowered expectations, but management commentary was overwhelmingly cautious, citing margin pressure from rising costs and new tariffs.

Sources: Bloomberg, U.S. Bureau of Labor Statistics, JSG Analysis

2. Two Core Narratives Driving Markets Now

A. From Tariff Threat to Tariff Reality The trade story has shifted from a risk to a reality. The implementation of broad tariffs on August 1st triggered immediate, though measured, retaliation from European and Mexican trade officials. The direct impact is now visible in sectors heavily reliant on international supply chains, particularly automotive, industrial machinery, and consumer electronics. The key question for the second half of the year is whether this is the final move or the opening salvo in a wider trade conflict.

• Portfolio Angle: The case for owning companies with domestic US focus, resilient supply chains, and strong pricing power (the ability to pass on costs) has strengthened. Multinationals with complex global operations face significant earnings headwinds.

B. The "Stagflation" Whisper Gets Louder July’s economic data painted a challenging picture: economic growth is clearly moderating (evidenced by cautious corporate outlooks) while inflation remains sticky and above target. This combination—stagnant growth plus inflation—is known as stagflation, an environment that can be punishing for both stocks and bonds. While we are not officially in a stagflationary period, the market is beginning to price in the risk.

• Portfolio Angle: In this environment, real assets historically perform well. This includes commodities like gold and energy, and inflation-protected bonds (TIPS). Quality stocks with low debt and stable cash flows are also better positioned to weather an economic slowdown than high-growth, speculative names.

3. Beyond the Headlines: The Growing Appeal of Private Credit

As banks tighten lending standards amidst economic uncertainty, many solid mid-sized companies are turning to non-bank lenders for capital. This has super-charged the world of Private Credit. These investments, which involve lending money directly to companies, can offer attractive yields (often floating-rate, which benefit when rates rise) and are not subject to daily stock market volatility. Once the domain of large institutions, this asset class is becoming more accessible to qualified investors through specialized funds. It represents a compelling alternative income source but comes with its own risks, primarily illiquidity (you can’t sell instantly) and credit risk (the borrower could default).

4. Action Checklist for August

• Prioritise Quality: Within your equity allocation, lean towards companies with fortress-like balance sheets and a history of dividend growth.

• Keep Bond Duration Short: With yields still trending higher, longer-term bonds remain vulnerable. Short-term bonds and floating-rate notes offer a safer harbour for fixed-income allocations.

• Crypto Consolidation: After hitting a new high near $123,000 in July, Bitcoin has pulled back and is consolidating. This is a healthy, expected pattern. The "digital gold" narrative in an era of high debt remains intact, but volatility is a given. Keep allocations small and use regulated ETFs for simplicity and security.

5. Bottom Line

The market has entered a tougher phase where the theoretical risks of June have become the concrete headwinds of August. Navigating the twin challenges of implemented tariffs and stagflationary pressures requires a defensive and deliberate approach. A balanced portfolio of quality equities, short-duration bonds, real assets, and (for suitable investors) select alternatives remains the most prudent strategy.

As always, please reach out to your Just Service Global adviser to discuss how these developments impact your specific financial goals.

— The Just Service Global Client Service Team