S&P 500 Faces Pressure Amid Weak Labor Data
Market Recap for the Week of August 3, 2025
The first four days of last week were relatively uneventful for the U.S. stock market. On Wednesday, the Federal Reserve announced that it would keep interest rates at their current level, which was in line with expectations. Although there was a small amount of volatility during the press conference, it was nothing significant.
Then, on Friday, we received the latest jobs report, which was very weak, leading to a decline of over 1% in the broad market indexes. In addition to the disappointing jobs data, Friday also marked the end of the 90-day pause on reciprocal tariffs. As a result, the economy is likely to experience additional strain from the next round of tariffs.
Regarding the jobs report, the U.S. economy added 73,000 jobs in July. However, the most concerning aspect of the report was the downward revisions to the prior months. While the Bureau of Labor Statistics (BLS) releases employment data monthly, it also issues revisions as more accurate information becomes available.
The May jobs report was revised down from an initial estimate of 144,000 jobs to just 19,000—a significant downward revision. June also experienced a substantial revision. These changes, combined with the weak July data, suggest that the labor market has slowed considerably since April.
The S&P 500 index continues to trade at a high forward P/E ratio of over 22x. While this is lower than the 25.2x reached at the peak of the dot-com bubble, it is still elevated. Bottom line: if economic data continues to weaken, a lower price-to-earnings ratio would be justified. However, it's important to note that stock prices and economic fundamentals do not always move in tandem.
“Weak jobs data and resumed tariffs suggest the labor market is slowing, even as stocks remain elevated.”
Chart of The Week
For those unfamiliar, an ETF (exchange-traded fund) is a popular investment vehicle used to gain exposure to stocks, bonds, or other asset classes. ETFs are similar to mutual funds but offer several advantages, including lower costs, better tax efficiency, greater transparency, and the ability to trade throughout the day.
This chart illustrates the growth of the ETF market. Although ETFs have existed since the 1990s, their popularity has only continued to rise. As ETFs become more widely adopted, the associated costs for investors are also expected to decline—which we view as a positive development.
The commentary in this blog is for informational purposes only and should not be taken as personalized investment advice
Chart Source: Bloomberg, J.P. Morgan Asset Management.
“Market-cap weighted” ETFs are index-linked passive investment vehicles. “Factor” ETFs are ETFs that focus on specific factors or characteristics and are passively linked to a custom index. “The ‘ETF Rule,’” officially SEC Rule 6c-11, went into effect in December 2019 and modernized regulation of ETFs as open-ended funds by establishing a clear and consistent framework for most ETFs across both indexed and actively managed strategies, enabling ETF issuers to bring new strategies to market, and permitting “custom in-kind” creation and redemption baskets to be available for all types of covered ETFs under the new regulation.
This slide comes from our Guide to ETFs.
Guide to the Markets – U.S. Data are as of July 31, 2025.
