Lexicon Financial Group Weekly Update — July 23, 2025
“Worry never robs tomorrow of its sorrow, it only saps today of its joy.”
From the desk of Craig Swistun, CIM, MFA-P, Portfolio Manager, Raymond James Investment Counsel, and Wayne Hendry, Client Relationship Manager, Raymond James Investment Counsel
ISSUE 189
Looking Around
Given how the markets have recovered from the tariff-induced volatility of Q2 2025, asking how they will fare in the second half of 2025 may seem like a trick question. The markets have been incredibly resilient, weathering the tense conflicts in the Middle East and Ukraine, relentless attacks on the Federal Reserve’s independence and tariff-on, tariff-off policies.
Stock markets have risen to record highs, while bonds have resumed a steady rally. Volatility in oil prices has subsided. This is an extraordinary change from early April, when the S&P 500 hit its lowest level in over a year and was on the precipice of a bear market, after President Trump unveiled his initial “Liberation Day” tariffs. This may be emblematic of the old adage about bull markets often climbing a ‘wall of worry.’ (1)
The resilience of the markets is certainly welcome but could it be an early warning of investor complacency? Several analysts have started warning of the possibility of catastrophe later this year. One of the most vocal voices of caution is the CEO of JPMorgan Chase, Jamie Dimon. He contends that, with the upcoming reinstatement of U.S. tariffs with trading partners like Europe and China, there is a possibility of rising inflation. Depending on its severity, consumer spending could slow significantly, which will lead to slower economic growth. And in the worst-case scenario, that could lead to stagflation. Other high-profile investors such as Michael Burry and Albert Edwards have also voiced their skepticism about whether the U.S. stock markets can sustain current valuations and foresee a possible a correction later this year.
While investors like Dimon are right to highlight market vulnerabilities, timing market crashes continues to be exceptionally difficult. And as we all know, it wouldn’t be the first time experts have called for disaster, only to see stock markets continue to rise.
The key takeaway here isn’t to ignore these warnings but to use them as a starting point for further research. Regardless of your investment time horizon, how do you make sure that you are staying within investment objectives and risk tolerances? (Hint: we do that for you.) (2)
It is worth noting that there has been a significant amount of better-than-expected economic readings over the last six months, which have supported investor sentiment and helped markets to climb the walls of worry. Inflation remained more or less constrained in most major economies (including the U.S. and Canada) for the first half of 2025, employment has remained more or less stable, and corporate earnings have beaten expectations thus far.
How things will shape out for the rest of 2025 remains to be seen. Investors often feel like they are living in unprecedented times. And, while the current economic environment is most certainly chaotic and frantic, the markets have experienced chaos before. It’s not that long ago that we were dealing with COVID-related market declines.
And interestingly, at least on social media, we’re starting to see more and more investment management firms promoting past performance of proprietary investment funds. You can set your watch by this behaviour. A five-year rate of return covers off a five-year period, which at the moment, conveniently means that for reporting purposes, you don’t have to include the market performance from early 2020, when COVID caused markets to decline sharply. Just something you should be aware of and watch out for.
Read and Watch
Want deeper insight into topics in your Weekly Update? Then, read and/or right click:
Opinion: Focus on tariffs is ignoring Canada's fastest-growing trade opportunity
What have Trump's tariffs achieved so far? Experts weigh in
'Made for Germany': German companies show optimism
EU, Japan to deepen cooperation in response to 'economic coercion,' 'unfair trade'
How Long Can China Keep Propping Up Its Consumers With Subsidies?
Looking Back
Toronto Stock Exchange’s S&P/TSX (TSX) composite index closed down 0.27 per cent last Friday but for the week it was 1.1 per cent higher. This, after hitting record highs on Thursday. But there are some clouds on the horizon such as better-than-feared growth and higher-than-wanted inflation, topped with the prospect of significant fiscal stimulus spending in the year ahead. This leaves a higher bar for the Bank of Canada to make additional interest rate cuts this year. (3)
In the U.S., the S&P 500 Index and Nasdaq Composite Index reached new records last week, supported by solid corporate earnings reports and generally favourable economic data. Earnings season began in earnest last Tuesday, with several big banks reporting earnings. JPMorgan Chase, the largest U.S. bank, and Citigroup both reported better-than-expected results for the second quarter. Well-known consumer-facing names such as PepsiCo, United Airlines, and Netflix also released reports that beat forecasts. Investors also seemed to appreciate economic reports that pointed to consumer strength and inflation levels that, while not improving, do not appear to be too worrisome. Notably, the U.S. consumer price index (CPI) showed its biggest monthly increase in five months but generally matched consensus estimates. On a year-over-year basis, prices rose 2.7 per cent, up from May’s 2.4 per cent. The U.S. Census Department’s retail sales report showed sales is up a better-than-expected 0.6 per cent in June after falling 0.9 per cent in May.
In local currency terms, the pan-European STOXX Europe 600 Index ended roughly flat as investors watched for signs of progress in U.S. and European trade talks. Other major stock indexes in Europe ended last week mixed. However, German investor sentiment was the highest it has been in three years - the ZEW index of economic sentiment in July rose for a third consecutive month, coming in at 52.7. This beat analyst expectations of a reading of 50.2. Almost two-thirds of experts polled called for the economy to improve, thanks to potential stimulus and expectations for a speedy resolution to the European Union’s trade dispute with the U.S.
Japan’s stock markets registered modest gains over the week. Returns were capped by political uncertainty ahead of Japan’s Upper House election on July 20. Inflationary pressures in Japan showed some signs of easing, as its core consumer price index (CPI) rose 3.3 per cent year on year in June, less than consensus estimates for a 3.4 per cent increase and down from 3.7 per cent in May. The softening in core inflation was mainly due to falling contributions from energy, reflecting government subsidies.
Stock markets in China ended last week with a gain.
China’s gross domestic product increased 5.2 per cent in the second quarter from a year ago, compared with the first quarter’s 5.4 per cent growth pace, according to China’s statistics bureau. Analysts said the second quarter’s higher-than-expected growth would likely ease pressure on Beijing to roll out further stimulus measures anytime soon. However, they also cautioned that economic growth would likely slow in the next six months amid worsening deflation pressures, weak retail sales growth, and the potential for a flareup in U.S. trade tensions once a temporary deal expires in mid-August. Earlier this month, China reported that its producer price index fell the most in nearly two years in June, the 33rd straight month of factory deflation.
Persistent weakness in China’s housing market has renewed calls for more stimulus from the central government. New home prices in 70 cities nationwide fell 0.27 per cent in June month on month, while values for existing homes fell another 0.61 per cent. Residential sales dropped 12.6 per cent in June from a year earlier, which is the sharpest decline this year, according to Bloomberg. The data showed that China’s property slump—now in its fifth year—continues to be a weight on consumer demand. (4)
The opinions expressed are those of Craig Swistun and not necessarily those of Raymond James Investment Counsel which is a subsidiary of Raymond James Ltd. Statistics and factual data and other information presented are from sources believed to be reliable, but their accuracy cannot be guaranteed. It is furnished on the basis and understanding that Raymond James is to be under no liability whatsoever in respect thereof. It is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities. Raymond James advisors are not tax advisors, and we recommend that clients seek independent advice from a professional advisor on tax-related matters.
The stock market is on a hot streak. It’s about to face a huge test, John Townfighi, CNN, July 23, 2025
Get ready for a US stock market crash? Zaven Boyrazian, CFA, Yahoo! Finance, July 18, 2025,
TSX drops on Friday, but up for week, after new tariff worries, The Globe and Mail, July 18, 2025
Global markets weekly update - Consumer inflation heats up in U.S., T. Rowe Price, July 18, 2025
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