Il Chiaro Finanziario’s Weekly Brief: July 20-26, 2025 – Markets in Balance Between Big Gains and Big Risks

This week (July 20-26, 2025) presented an interesting mix in global markets. We observed contained overall movements, with Asia and Europe outperforming the United States in terms of performance. However, the real surprise came from individual companies that registered incredible leaps, known as stocks rallies, even if they often hide significant risks and require a close watch on their financial fundamentals.

Meanwhile, attention remains fixed on inflation, the decisions of central banks, and the dynamics of global trade. Next week (July 27 – August 2) will be crucial, with earnings reports from American tech giants and major European banks. Be prepared for potential surprises regarding prices and interest rates, especially in the United States and the Eurozone.

📈 Global Markets: Balance and Geographical Surprises

Here’s an overview of how the main markets performed over the last seven days:

🌍 The Macroeconomic Scene: Inflation, Banks, and Trade Under Scrutiny

The overall global economic picture is focusing on several key points:

• Inflation Under Control (but not entirely):
  • In the United States, inflation stands at 3.1%.
  • In Europe, it remains stable but slightly above central banks’ targets.
  • In Australia, inflation is showing a slight decrease.
  • Central banks, like the ECB, prefer to wait: no immediate interest rate cuts are expected. The Fed’s next moves are also awaited after mixed US data.
• Global Trade in Motion:
  • Important trade agreements have been signed between the US and Japan, and between the US and Europe.
  • China has launched a new large infrastructure project.
  • This is boosting Asian exports, which are strongly recovering and driving stocks rallies markets like the Nikkei and Hang Seng.
• Labor Market and Consumption Situation:
  • In the United States, unemployment is stable at 4.1%.
  • In Europe, the labor market has slightly improved.
  • Australia is preparing for a recovery in consumption, partly due to a change in how inflation is calculated (full monthly data).
  • In Italy, industrial production is still slightly down (-1.2%), but signs of stabilization are visible.

💥 “Extravagant” Stocks Rallies and Their Risks: Caution Advised!

This week, the real fireworks in the markets came from medium or large-sized stocks that saw incredible leaps. However, these stocks rallies often hide significant risks:

• QuantumScape: Momentum-Driven Rally, Not Solid Profits:
  • This company registered an impressive +70.0% over the last year, far outperforming major markets.
  • But beware: last week it lost 18.2%, falling to $11.97. This demonstrates its extremely high volatility (the price can fluctuate very rapidly).
  • The main problem? QuantumScape is not yet profitable. In the last quarter, it lost $0.20 per share, and a loss of $0.83 per share is projected for 2025. This makes the stock very “nervous” and vulnerable to sudden drops.
• Other Spectacular Jumps (but with caution):
  • Medpace Holdings, Inc. saw a record jump of +43.5% this week, but analysts suggest its price might already be too high.
  • Power Construction Corp. of China rose by +42.1%, showing solid growth but with limited room for further strong increases.
  • PT DCI Indonesia Tbk gained +41.5%, but its price is extremely high compared to its earnings (P/E of 770x!) and could fall by 48% relative to its fair value.
  • Hua Hong Semiconductor (+383x P/E) and Astera Labs (+487x P/E) also show signs of inflated prices relative to their fundamentals, with a significant risk of decline.

💡 Key Takeaways from This Week

• Speculative stocks Rallies: The largest gains occurred outside major indices and involved stocks considered riskier, often with less solid financial foundations. These stocks rallies are driven more by enthusiasm or “bets” than by the company’s true health.
• Stable Indices: Major global stock indices had a positive week but without excesses, indicating a good balance between investor enthusiasm and caution.
• Sustainability Warning: These sudden price jumps are difficult to sustain over time. Volatility is a real risk, especially for stocks that have grown too rapidly without solid earnings support.

🧭 What to Expect Now?

Europe and Asia are experiencing the most positive “vibrancy” in the markets. The United States, on the other hand, is in a consolidation phase after its records, awaiting clear signals from the macroeconomic front.

Next week will be a true “stress test” for the market: earnings reports from major US tech companies (like Apple, Microsoft, Google) and European banks (Deutsche Bank, Santander) will tell us whether the current stocks rallies market records are sustainable. Their numbers could push markets even higher or, conversely, increase uncertainty.

Global trade negotiations and central bank interest rate decisions will remain the true drivers for market direction in the second half of the year.