In today’s Steady Investor, we break down what’s fueling the market rally—and what could derail it next, including:
Japan and the U.S. Reach a Trade Deal – The U.S. and Japan reached a trade agreement this week that averts what could have escalated into a significant tariff standoff. As part of the deal, the U.S. will set its so-called reciprocal tariffs on Japanese goods at 15%, down from the 25% rate previously threatened. Japanese officials confirmed that automotive tariffs would fall accordingly from 25% to 15% while separate national-security tariffs on steel will remain unchanged at 50%.In exchange, Japan has committed to opening its markets more broadly to U.S. exports, including cars, trucks, and agricultural goods like rice. The agreement also includes a pledge for Japan to invest $550 billion in the U.S., with details yet to be disclosed. While the deal reduces uncertainty, it still marks a meaningful increase in trade barriers. The new 15% tariff rate on Japanese imports, though down from the 25% level initially proposed, is well above the 2.5% rate that applied to cars before recent policy shifts. It is fair to say that higher tariffs will raise costs for both businesses and consumers, even if Japanese exporters absorb some of the impact.As for the $550 billion investment, Japanese officials have signaled that much of it may be supported through state-backed financing with the goal of building resilient supply chains. If true, that could blur the lines between foreign direct investment and industrial policy, especially if the U.S. government directs where those funds will be invested. When governments pick winners and losers instead of markets, the likelihood of failure and inefficiency is higher. For now, markets appear relieved that the U.S. and Japan stepped back from a more aggressive tariff clash. But with the average U.S. tariff rate still on track to settle significantly higher than pre-2024 levels, the longer-term economic impact will depend on whether growth-oriented policies can outpace the drag of higher trade barriers.1
Get Ahead of the Next Tariff Shock: What Investors Need to Know Before August 1
Tariff tensions are rising again, with new trade threats and deal deadlines approaching fast. Delays may buy time, but markets are already reacting.
Our free July 2025 Zacks Market Strategy Report2 shows how to position your portfolio now—before headlines turn into market moves. Read it today and catch up on other major market and economic stories, including:
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Home Prices Hit a Record High, Again. Sales Slump – The spring housing season was a bust. Affordability constraints continue to weigh on the market, with U.S. existing-home sales falling 2.7% in June to an annualized pace of 3.93 million—the slowest since last September. This comes as existing-home prices hit a record median price of $435,300, according to the National Association of Realtors. High prices and mortgage rates above 6.5% are keeping many prospective buyers sidelined. Supply also remains below pre-pandemic levels in most regions, keeping upward pressure on prices. Buyers are adjusting by looking for smaller homes, exploring mortgage assumptions, or teaming up with family or friends to make purchases work. According to Zillow, more than one in four listings had a price cut in June, the highest share for that month since at least 2018, giving buyers more leverage than they’ve had in years. The typical home spent 27 days on the market in June, up from 22 days a year ago, demonstrating overall weakness. Prices continue to climb, but volume remains depressed, a dynamic that keeps housing from contributing meaningfully to broader economic growth.3
Are Leading Economic Indicators Flashing Warning Signals? The Conference Board’s Leading Economic Index (LEI) fell 0.3% last month, driven by weak manufacturing orders, persistently low consumer expectations, and a rise in unemployment insurance claims.The June drop followed a flat May reading that was revised up from an earlier decline. Despite continued stock market strength, the LEI has now fallen 2.8% in the first half of 2025, more than double the decline over the second half of 2024. For investors, the LEI’s dip may hint at softness ahead, but context matters. The index’s persistent decline has not derailed broader growth thus far, and real-time data still show resilient consumer activity, labor market stability, and strong corporate earnings. Still, with tariffs increasingly visible in input costs and prices, and consumer confidence lagging, the risk of a broader deceleration is worth monitoring.4
Trade Tensions Are Back—Is Your Portfolio Ready? Trade flare-ups are back on the table, and the clock is ticking. Policy moves could trigger fast shifts in sentiment and pricing.
Our free July 2025 Zacks Market Strategy Report5 breaks down what’s brewing behind the scenes—and how investors can stay proactive, not reactive. Grab your copy now and get up to speed on other critical market themes, including:
Inside, you’ll find insights, such as:
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Disclosure