Key Takeaways
- U.S. jobless claims dip
- Investors brush off tariff threats
- RBA rate decision stuns markets
On this week’s edition of Market Week in Review, Director and Senior Investment Strategist Alex Cousley discussed the resilience of the United States economy as well as the latest trade developments. He also dug into the Reserve Bank of Australia’s (RBA) surprising decision to leave interest rates unchanged.
Resiliency Reigns
While the first full week of July was light on economic data, Cousley said the numbers that were released point to the ongoing resilience of the U.S. economy.
“Both initial jobless claims and continuing jobless claims for the past week came in a little better than expected, with slightly fewer people filing for unemployment insurance,” he stated.
Cousley noted the recently passed One Big Beautiful Bill is expected to modestly boost economic growth in 2026 by up to 0.4%. A key watchpoint will be whether the expansion of tax benefits for businesses leads to an increase in capital expenditures, he said.
Shrugging It Off
Turning to geopolitics, Cousley noted tariffs and trade are back in the headlines this month. July began with the U.S. and Vietnam signing off on a trade pact that places 20% tariffs on Vietnamese imports and 40% tariffs on products made elsewhere but shipped through Vietnam. Then this past Monday, President Donald Trump sent letters to several countries—including Japan and South Korea—warning they’ll face 25% tariffs if they don’t reach an agreement on trade with the U.S. by Aug. 1.
The stock market, however, has largely been unfazed by these developments, with the S&P 500 and the Nasdaq setting new all-time highs on Thursday. “The view in markets is still that tariffs are a negotiating tactic by the Trump administration,” Cousley explained.
He added that while recession risks still look a little higher than normal, they’ve fallen from their post-“Liberation Day” peaks. The U.S. economy remains robust and the European economy looks pretty healthy, Cousley said, noting China’s economy continues to stumble.
Pause Down Under
Cousley finished with a look at the RBA's unexpected decision on interest rates. He said markets had fully priced in a rate cut but that RBA officials opted to leave rates unchanged instead.
Why? Cousley explained that central-bank leaders want to feel more confident about the slowdown in inflation before lowering rates again. “The RBA has already cut rates a couple times this year, and they want to see how those cuts flow through to the broader economy first,” he remarked.
Cousley noted Australia’s mortgage market is very different from the U.S., with most borrowers having variable mortgage rates rather than 30-year fixed rates. That's why Australian consumers are far more impacted by interest-rate moves, he said.
Cousley added that the other challenge the RBA is grappling with is the country’s tepid productivity growth. “Australia’s productivity gains have been very minimal, which makes it harder for inflation to come down further,” he noted. That said, Cousley thinks one more rate cut is possible later this year if the situation improves.