What’s driving the stock market this week

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August 04, 2025

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Here’s what’s powering the stock market this week—and why investors are keeping a close eye on several key dynamics:

Key Drivers of the Market

1. U.S. Labor Market Weakness & Fed Rate Expectations

  • The U.S. added only 73,000 jobs in July, well below forecasts, triggering a sharp drop in equity indices—S&P fell ~1.6%, Nasdaq >2%

  • This weak employment read boosted speculation that the Fed may cut interest rates as early as September, lifting bond and equity sentiment

2. Tariff Tensions & Trade Policy Uncertainty

  • New tariffs, including a surprise 39% U.S. tariff on Swiss imports and broader measures covering 66 countries, have rattled markets

  • Investor sentiment was buoyed midweek by tentative trade deals with the EU and Japan, creating a brief window of relief before volatility returned

3. Tech & AI Investment Surge

  • Big Tech’s staggering $350 billion in AI investment in 2025 is reshaping growth expectations—pushing valuations higher and supporting sectors tied to data centers and semiconductors

  • However, some strategists are warning of a broad-based valuation surge—particularly across the “Terrific 20” large-cap names beyond the Magnificent Seven—that could resemble a bubble driven by multiple expansion, not earnings

4. Gold & Safe-Haven Demand

  • Rising uncertainty and geopolitical tensions drove a surge in gold demand, with gold becoming the second-largest reserve asset globally

What the Week Ahead Could Bring

  • Watch for upcoming ISM PMI data, GDP updates, and major corporate earnings across tech, pharma, construction, and entertainment that may shift short-term sentiment

  • Continued geopolitical developments or tariff shifts—especially around the U.S.–EU or U.S.–Brazil trade—could trigger renewed market swings.

  • Market leadership may rotate from mega-cap tech to equal-weighted sectors if rate-cut expectations remain muted or growth signals falter

All this being said, I am watching Gold as a possible play to the upside and Energy to the downside. More trade ideas inside our RagingBull ecosystem, so give us a call if you have any questions!

Do you consider gold a good long-term investment?

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