Key Insights for the Rest of 2025

Just before the July 4th holiday, Congress passed a domestic policy bill that extended the 2017 tax cuts that were set to expire this year while making some of the 2017 rules permanent. The bill also created several new tax laws for individuals while addressing other tax issues for businesses.

Some of the changes will start this year, while others will kick in in 2026. Like previous tax laws, some of the new rules are scheduled to expire, while others are permanent.

Here’s a quick summary of five individual tax law changes that are expected to impact most tax filers in 2025.

These are just some of the new individual tax law changes. The bill also included an updated child tax credit as well as new rules regarding tax on tips, overtime pay and auto loan interest. On the business side, the bill updated the small business deduction and addressed the expensing of capital and factory investments.

If you see anything in the new legislation that you want to discuss, please reach out. The new bill has added new complexity to the tax code, so we are anticipating the IRS will issue some guidelines on how to interpret the updated rules later this year.

Market Insights

Stocks rose last week despite mixed signals on inflation as investors kept one eye on the Fed’s September meeting.

The Standard & Poor’s 500 Index advanced 0.94 percent, while the Nasdaq Composite Index added 0.81 percent. The Dow Jones Industrial Average rose 1.74 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, increased 2.16 percent.

Third Gain in Four Weeks

Stocks posted modest losses to start the week as investors braced for July consumer inflation reports. The White House’s executive order on Monday extending the tariff deadline for China by 90 days failed to move markets in the other direction.

Stocks then staged a two-day rally following the latest Consumer Price Index (CPI) report, which showed July inflation held steady over the prior month—beating expectations. The inflation news led some investors to move into small-cap stocks, with the Russell 2000 Index of small-cap stocks rising 5 percent over Tuesday and Wednesday.

However, markets slipped Thursday as investors dug into the Producer Price Index (PPI) for July, which showed wholesale inflation hit a 3-year high last month; this was the third weekly gain in the past four weeks for each of the three major averages; the S&P and Nasdaq advanced four of the last five weeks.

 

The V Shaped Rally of 2025

The last two weeks of July were about as action-packed as it gets for investors. Here’s a quick recap of the highlights:

  • The U.S. economy.  Gross domestic product grew at a 3 percent rate in Q2, better than the 2.3 percent forecast. Consumer spending helped spark the gain, which was also helped by…
  • Trade deals. The White House reached a trade deal with Japan and the European Union, but officials unsettled markets when they announced a new round of tariffs on other countries. The White House is optimistic that a deal can be reached with China, and that news helped…
  • Stock prices. The Standard & Poor’s 500 pushed higher in July, a strong rebound since early April. Various factors have helped, but one of the most important factors has been…
  • Corporate profits. Big-name tech stocks posted some “magnificent” Q2 numbers, with many riding the AI wave. But they are not alone. 80% of all companies have checked in with Q2 numbers that were better-than-expected results, partly due to…
  • Inflation. While consumer prices have received a lot of scrutiny in recent years, only 228 S&P 500 companies indicated they were concerned about inflation in Q1 shareholder calls. But inflation is still a worry for…
  • The Fed: At its July meeting, Fed officials said, “The unemployment rate remains low, and labor market conditions remain solid. Inflation remains somewhat elevated.” A few days later, a disappointing jobs report brought the Fed’s decision to leave short-term rates unchanged back into the spotlight.

How should you cope when you get a two-week wave of economic information? At the risk of sounding like a broken record, the best way is to focus on your overall strategy and tune out the noise. A couple of charts help illustrate my point.

In “An Up, Down, and Up Year,” you can see that stock prices were under pressure in early April on concerns over how the trade situation was unfolding. Fear spread, which led some investors to move to the sidelines. But notice the “V” shaped rally that followed.

In “Going with the Flow?,” you can see that almost every major Wall Street firm adjusted its 2025 forecast lower after the April 2 tariff update. What’s more interesting is that many changed their minds—again—and revised their estimate higher as stock prices improved through May and June. Notice the “V” shape here, too. Will they adjust again? Maybe.One thing is certain: the only thing we know about the rest of 2025 is the number of days left on the calendar! So, stay focused, expect volatility and remain committed to the approach we’ve created together.

 

Source(s):

CNBC.com, July 3, 2025. “Tax changes under Trump’s ‘big beautiful bill’ — in one chart.” 

FoxBusiness.com, July 4, 2025. “Five major policies to know from the One Big Beautiful Bill Act.”

TaxFoundation.org, July 2, 2025. “The Good, the Bad, and the Ugly in the One Big Beautiful Bill Act.”

YCharts.com, August 16, 2025. Weekly performance is measured from Monday, August 11, to Friday, August 15. TR = total return for the index, which includes any dividends as well as any other cash distributions during the period. Treasury note yield is expressed in basis points.

CNBC.com, July 30, 2025. U.S. economy grew at a 3% rate in Q2, a better-than-expected pace even as Trump’s tariffs hit

USAToday.com, July 29, 2025. Trump’s trade deal with the EU: What it means for your wallet

Insight.FactSet.com, July 25, 2025. S&P 500 Earnings Season Update: July 25, 2025

Insight.FactSet.com, Jun 13, 2025  Are More S&P 500 Companies Citing “Inflation” on Earnings Calls for Q1?

CNBC.com, July 30, 2025 Divided Fed holds key interest rate steady, defying Trump’s demands for aggressive cut

CNBC.com, August 1, 2025. U.S. added just 73,000 jobs in July and numbers for prior months were revised much lower