Estate & Trust Advisors

707 Skokie Blvd Suite 300 Northbrook, IL 60062

847-441-4600

www.etaadvisor.com/

August 2025
Market Update
(all values as of 07.31.2025)

Stock Indices:

Dow Jones 44,130
S&P 500 6,339
Nasdaq 21,122

Bond Sector Yields:

2 Yr Treasury 3.94%
10 Yr Treasury 4.37%
10 Yr Municipal 3.27%
High Yield 6.86%

YTD Market Returns:

Dow Jones 3.73%
S&P 500 7.78%
Nasdaq 9.38%
MSCI-EAFE 15.67%
MSCI-Europe 18.44%
MSCI-Pacific 10.55%
MSCI-Emg Mkt 15.60%
 
US Agg Bond 3.75%
US Corp Bond 4.24%
US Gov’t Bond 3.72%

Commodity Prices:

Gold 3,346
Silver 36.79
Oil (WTI) 69.38

Currencies:

Dollar / Euro 1.15
Dollar / Pound 1.33
Yen / Dollar 148.58
Canadian /Dollar 0.72
 

One Big Beautiful Bill Act Highlights Estate Tax Exclusion: Increases to $15 million for single filers and $30 million for married filers in 2026, and with further inflation-indexed increases after 2026. Different from prior estate tax exclusion provisions in that the bill made this increase “permanent” in the sense that no automatic sunset or expiration date has been imposed. The current exemption for individuals of $13.61 million and $27.22 million for married couples, was set to be reduced by half at the end of 2025. Interest Deduction On Auto Loans: Interest on auto loans deductible, yet applicable to only new autos with final assembly in the U.S. for tax years 2025 – 2028. Deduction limited to $10,000 and phases out when income exceeds $100,000 for single filers and $200,000 for joint filers. Tax On Overtime Pay: This deduction, capped at $12,500 for individuals and $25,000 for joint filers, phases out for higher earners and is set to expire on December 31, 2028. While it doesn’t eliminate taxes on overtime, it provides a tax break for those working extra hours, potentially increasing take-home pay. Trump Accounts / MAGA Accounts: Tax-deferred investment accounts for newborn American children born in the United States between January 1, 2025 and December 31, 2028. Newborns will be seeded with a one-time government contribution of $1,000. The accounts will track a stock index and allow for parents and families to make additional private contributions of up to $5,000 per year. Account holders will be allowed to make partial withdrawals at age 18, and access the full amount at age 25, but only for specific purposes, such as paying for higher education or taking a loan to start a small business. Account holders gain full access to the funds at age 30 to use it for any purpose. Parents or the child’s legal guardians manage the account until the child reaches 18. To open an account, the child’s guardian or parent must have a Social Security number and be authorized to work in the US. The initial $1,000 provided by the government to fund Trump Accounts is a government contribution, not a tax credit in the traditional sense for taxpayers who contribute to the account. There are no tax deductions for contributions, and earnings are taxed as ordinary income. Expanded 529 Plan Provisions The bill expands the definition of qualified expenses for 529 plans beyond traditional higher education costs and K–12 tuition to include a wider range of educational and career development opportunities such as vocational schools, trade schools, and technical schools. Newly eligible expenses include tuition, books, fees, exam costs, and supplies for workforce, on-the-job training, and continuing education programs.
 The $10,000 per-year limit for K–12 tuition and the $10,000 lifetime limit for student loan repayments remain in place. Federal tax treatment of 529 plan growth, as well as in-state tax deductions and credits, are unchanged Tax on Social Security The One Big Beautiful Bill (OBBB), also known as the Tax Cuts and Jobs Act of 2025, does not actually eliminate taxes on Social Security benefits, instead, it provides a temporary, income-based deduction for taxpayers aged 65 and older. The deduction is $6,000 per individual and phases out for those with higher incomes over $75,000 for single filers, $150,000 for joint filers. The deduction is not limited to those receiving Social Security benefits, it also applies to all seniors within the specified income limits. The deduction is temporary and set to expire at the end of 2028. The OBBB does not make any changes to the Social Security program itself, such as the benefits structure or eligibility requirements.  StableCoins Evolving To Become More Accepted The GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins Act of 2025) is landmark legislation aimed at creating the first comprehensive federal regulatory framework for payment via stablecoins in the United States.The GENIUS Act establishes clear rules for the issuance, backing, and supervision of payment via stablecoins and digital assets pegged to a stable value such as the U.S. dollar. Long term, the act seeks to integrate stablecoins into the mainstream banking and payments system, providing legal certainty and consumer protections.
 Sources: Tax Foundation, SSA.gov, TheWhiteHouse.gov Macro Overview

Markets reacted to uncertainty surrounding the effect of tariffs on corporate earnings and consumer sentiment, as economists and analysts have found it difficult to determine how much of an influence tariffs have had on profitability and consumers thus far.

The price of various goods picked up in June, a possible indication that companies may be starting to pass tariff costs on to consumers in the form of higher prices. The Consumer Price Index (CPI) rose 2.7% in June from a year earlier, as reported by Labor Department, faster than the prior month’s increase of 2.4%. The price of furniture, toys and clothes, which tend to be sensitive to tariffs, posted larger increases in June.

Progressive deregulation as well as the burgeoning demand for electricity and natural gas driven by the expansion of AI infrastructure (eg. data centers), is creating long term growth dynamics for the utility sector, which has historically never demonstrated growth characteristics.

The U.S. economy grew at an annualized rate of 1.2% in the first half of 2025, while consumer spending grew by 0.9% for the same period. The data is indicating slowing activity and decelerating expansion among various sectors.

Stocks wavered in July due to the challenge of determining how much of the newly imposed tariffs are being absorbed by U.S. companies and consumers. Recent company earnings have revealed that a portion of U.S. companies are absorbing tariff costs while others are passing tariffs along to consumers in the form of higher prices.

Questions surrounding the collection of data by the Bureau of Labor Statistics (BLS), has raised doubt about the accuracy of data revealing employment and labor force statistics. The government’s economic data has been less reliable than usual since the pandemic, undergoing constant revisions that in some cases have dramatically altered perceptions of the economy. The integrity and reliability of U.S. government data is also a critical component of the dynamics and function of the U.S. Treasury market.

Approximately half of retired seniors pay tax on Social Security benefits, which help fund Medicare and future Social Security benefits. Lower tax rates and new tax provisions are expected to reduce revenue into the Social Security Trust Fund and Medicare as estimated by the The Committee for a Responsible Federal Budget (CRFB). Regardless, it is projected that the Social Security Trust Fund will not be able to pay full scheduled benefits as early as 2032. The primary reason for the trust fund’s depletion is a declining birth rate and increasing life expectancy which translates into fewer workers contributing to Social Security relative to the number of beneficiaries receiving benefits.

The technology sector has announced more than $1.5 trillion in commitments to investing in the U.S. since the beginning of the year, hoping for favorable policies on tariffs and digital-trade barriers. The investments include the construction of factories, research & development, and employee hiring.

Sources: BLS, U.S. Treasury, Bloomberg, SS.gov, CRFB, WhiteHouse.gov

 
average vehicle in 1949 achieved roughly 13 MPG

Rates Uncertain Until Fed Decides On Further Cuts – Fixed Income Update

Fixed income indices had a mixed month, with Treasuries experiencing fluctuating long-term yields, reflecting investor concerns over inflation and economic growth. Markets reacted to poorer than expected employment data released by the Bureau of Labor Statistics (BLS) by sending bond prices higher and yields lower at the end of July.

Interestingly enough, the weak jobs data release actually helped the Fed as markets drove bond yields lower without the Fed having to take any action. Employment data is critical for the direction of bond yields since a weakening jobs market is indicative of slowing consumer expenditures and alleviating inflation. The rate on a 30-year fixed conforming mortgage fell to 6.72% on July 31st, down from 6.91% at the beginning of the year. Any reduction by the Fed is expected to help buoy the housing market with lower mortgage rates. (Sources: FreddieMac, U.S. Treasury, BLS)

Equities Navigate Tariffs In July – Domestic Stock Overview

Despite ongoing trade tensions and macroeconomic uncertainty, domestic equities maintained on upward momentum in July, with the S&P 500 index and Nasdaq increasing in July. Propelled by strong corporate earnings and renewed consumer sentiment, equities were resilient to ongoing trade and data headwinds. Information technology, utilities and industrials were the leading sectors in July, while other sectors were mixed.

The weak employment data release was of concern for the stock market since less companies are hiring and more workers are finding it increasingly difficult to land a job. Such labor market dynamics can slow economic growth and curtail inflationary pressures. (Sources: Bloomberg, S&P)

How Autos Have Become More Fuel Efficient Over The Decades – Auto Industry Overview

As technological advances have been applied to the auto industry, cars have become more efficient and electronically sensible. Technology has been able to increase horse-power while also decreasing fuel consumption over the past few decades.

Smaller, more efficient 4 cylinder engines now produce the same amount of power as earlier V8 engines from the 70s and 80s that were known as “fuel hogs”. Data collected by the U.S. Energy Information Administration as early as 1949, has shown a gradual decrease in fuel consumption per vehicle, translating into higher miles per gallon (MPG). The average vehicle in 1949 achieved roughly 13 MPG, while the average vehicle as of the most recent data was 18.4 MPG. (Sources: U.S. Energy Information Administration)

 
Data centers are projected to account for up to 12% of electricity demand by 2028

Artificial Intelligence (AI) Is Elevating The Cost of Electricity – Energy Sector Update

As the expansion and proliferation of Artificial Intelligence (AI) continues throughout the economy, the demand for electricity is also intensifying. AI is essentially fields of servers packed with incredibly fast semiconductor processors that demand enormous amounts of energy in order to calculate and process data. These server facilities are known as data centers which are usually located in rural areas such as deserts and harsh weather regions. Demand for power by these data centers is directly competing with demand by consumers across the country, leading to rising utility bills.

As the nation’s power grid struggles to provide ample energy for consumers, data centers, and factories, the need to expand and build new power plants has risen to levels never seen before. The average cost of electricity per kilowatt-hour in a U.S. city began to rise above historical trends in 2021 when significant expansion of the data center industry began, including a large number of new facilities coming online that same year. The building and opening of new data centers has continued ever since, with the average data center consuming almost as much power as a small city. Data centers accounted for roughly 4.4% of total electricity consumption in 2023, with projections estimating a rise to 6.7% to 12% by 2028, according to the U.S. Department of Energy. (Sources: U.S. Dept. of Energy, Federal Reserve Bank of St. Louis)

What The European Union Exports To The U.S. – International Trade

The United States imports a wide array of materials and finished products from Europe with the total value of European Union (E.U.) imports into the U.S. totaling over $570 billion in 2024. The most significant imports from Europe to the U.S. are pharmaceuticals and medical products, accounting for roughly $127 billion while automobiles and automotive components constitute about $57 billion in exports to the U.S. Other significant exports to the U.S. include machinery, optical products, electrical components, and organic chemicals.

Trade between the U.S. and the European Union are distinctive from other countries as the E.U. is made up of 27 countries with different economies and political leaders. All trade negotiations with the E.U. are accomplished with the President of the European Commission, who represents all 27 countries for the interests of the E.U. as a whole.

Since labor costs in the E.U. can be restrictive for certain manufacturers, several European auto companies have actually initiated production of autos in the U.S. over the past few years. Part of the current negotiation process does include incentivizing additional transition of production and manufacture to the U.S. (Sources: EuroStat, U.S. Dept. of Commerce)

 
Credit card debt accounts for 6.5% of total consumer debt

What Prompted The Turmoil With The Government’s Employment Data – Government Agency Overview

The dismissal of the Commissioner of the Bureau of Labor Statistics prompted questions as to how employment data is collected and what may have triggered the termination. Regardless, the financial community did not dismiss the firing as justified. Concerns surrounding the accuracy of government data drew attention since such data is incredibly critical for the determination of fiscal and monetary policy initiatives.

The process of employment data collection has been mired with flaws since the onset of the pandemic in 2020. What used to be face to face surveys of businesses and corporate human resource departments, dwindled into an online questionnaire riddled with muddled questions. The BLS surveys about 121,000 businesses and government agencies, covering approximately 631,000 worksites. The survey is conducted monthly and collects data from companies’ payroll records on employment, hours, and earnings. Primary data collected in these surveys include, number of employees on the payroll, hours worked, wages paid, as well as overtime and part-time status. Data collected from these surveys are used to generate the widely cited monthly Employment Situation report, which translates into the releases followed by the Fed, the White House, analysts, and economists.

The termination of the BLS commissioner by the President was triggered by unusually large downward revisions to employment gains for June and May. Adjustments and revisions are common for such data, yet the dramatic revisions sowed angst about the credibility of the data. The revised data from the BLS showed the economy added 33,000 jobs in June and May, instead of 291,000 previously reported.Some economists believe that the dramatic revisions were brought about by smaller companies that did not reply to BLS surveys in a timely manner. (Sources: BLS, OEWS, Office of Survey Methods Research (OSMR)

Consumer Debt Slowly Rising – Household Finances

Over the past few months consumers have been adjusting their spending habits, cutting down on discretionary items such as TVs and furniture, while shifting purchases to more affordable brands and products. Ongoing elevated prices have been a burden to consumers as wages have not been keeping up with many of the price increases. In doing so, consumers have been relying more on debt in order to make payments and afford essential items. Total outstanding consumer debt increased to $18.38 trillion in the second quarter of 2025, up from $14.3 trillion at the beginning of the pandemic in the first quarter of 2020. Total consumer debt includes mortgages, credit card balances, home equity lines of credit and student loans. Credit card debt accounted for 6.5% of total consumer debt in the second quarter of 2025, up from 5.3% three years ago in 2022. Economists closely watch rising consumer debt as an indicator of any financial strain on household spending. (Source: Federal Reserve Bank of St. Louis)

 

Market Returns: All data is indicative of total return which includes capital gain/loss and reinvested dividends for noted period. Index data sources; MSCI, DJ-UBSCI, WTI, IDC, S&P. The information provided is believed to be reliable, but its accuracy or completeness is not warranted. This material is not intended as an offer or solicitation for the purchase or sale of any stock, bond, mutual fund, or any other financial instrument. The views and strategies discussed herein may not be appropriate and/or suitable for all investors. This material is meant solely for informational purposes, and is not intended to suffice as any type of accounting, legal, tax, or estate planning advice. Any and all forecasts mentioned are for illustrative purposes only and should not be interpreted as investment recommendations.