Monthly market roundup: Positioning for volatility ahead

July 2025 - The stock market roller coaster has been making investors dizzy. Unfortunately, TIAA Wealth Management’s chief investment officer expects the cloud of uncertainty to persist in the second half of the year. Writing in his 2025 Midyear Outlook, CIO Niladri “Neel” Mukherjee forecasts “recurring bouts of volatility” for the remainder of 2025, as investors react and overreact to the latest headlines on jobs and tariffs.

In addition to the Midyear Outlook, this month’s market roundup highlights the CIO team’s review of the One Big Beautiful Bill Act—aka the new tax and spending package Republicans muscled through Congress— as well as a new research report on what the Iran-Israel conflict may mean for financial markets.

A positive outlook for stocks—with caveats

In TIAA Wealth Management’s 2025 Midyear Outlook, Mukherjee predicts a slowing economy and “small yet positive equity gains” in the second half.

“Our base-case scenario assumes that realpolitik and court rulings are going to lead to a gradual stabilization of trade tensions and that the Trump administration will pivot toward a more market-friendly policy mix where tax cuts and deregulation are prioritized,” Mukherjee writes. Under this scenario, inflation risks abate along with trade tensions, which allows the Federal Reserve to resume cutting interest rates.

Read the 2025 Midyear Outlook here.

Reaction to the One Big Beautiful Bill Act

In another report, Mukherjee and his team gave their review of the new tax and spending package—the One Big Beautiful Bill Act (OBBBA)—recently passed by Congress and signed into law by President Trump. “Our view is that the impact of this tax bill on aggregate economic growth could be modest, rather short-lived and concentrated in select household groups and corporate sectors [such as manufacturing],” they write.

The report notes that OBBBA does little to alleviate the bond market’s worries about the rising federal debt. The total cost over the next decade could be as high as $5 trillion if some temporary measures are made permanent before expiration. This would push the ratio of U.S. Treasury debt to U.S. GDP to 127% by 2035 and would force the U.S. Treasury to pay $700 to $800 billion in extra interest costs. “These,” the CIO team writes, “are not examples of fiscal discipline.”

Read the full report on the OBBBA here.

Iran, Israel, and the impact on markets

Mukherjee and his team also published a CIO FocusPoint report addressing the market impacts of the Iran-Israel war and U.S. airstrikes on Iran’s nuclear sites. They note that if Iran were to follow through on threats to close the Strait of Hormuz—the waterway connecting the Persian Gulf and the Arabian Sea through which 20% of the world’s crude oil passes—it could temporarily lead to a 50% increase in oil prices.

While higher oil prices would create uncertainty for businesses and consumers, the impact on the U.S. economy could be muted. “It is important to note,” they write, “that the United States is a net exporter of oil, and the U.S. economy is far less sensitive to rising oil prices than it was in the 1970s and 1980s.” They caution investors against overreacting. “Historical precedent,” they write, “suggests that markets tend to fade geopolitical flare-ups and that investors should resist the temptation to react to volatility induced by geopolitical developments.”

Read the full report here.

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For more insights on market and economic conditions—and to discuss the implications for your investment portfolio and financial plan—talk to your TIAA Wealth Management advisor. Don’t yet have an advisor? Schedule an appointment.