U.S. Large-Cap and Mid-Cap Stocks Poised for Resilience Amid Tariff-Driven Volatility

In July 2025, U.S. equity markets have demonstrated remarkable resilience, maintaining levels near all-time highs despite renewed concerns over tariffs and an overall slowing economy. This steadiness is primarily supported by strong performances in the energy and industrial sectors, which have cushioned the market from headwinds posed by trade tensions and decelerating growth.

Market Overview: Navigating Tariff Uncertainties

The resurgence of tariff concerns—rekindled by recent geopolitical developments—initially stirred risk-off sentiment among investors. Nonetheless, the broader market has absorbed these shocks without ceding significant ground. According to the latest analysis by Edward Jones and FactSet (July 11, 2025), energy and industrial stocks have served as defensive bulwarks, benefiting from elevated commodity prices and robust infrastructure spending.

This divergence in sector performance underscores a nuanced market landscape where investors are selectively rotating capital into areas supported by tangible fiscal tailwinds. The anticipated fiscal stimulus, monetary easing, and deregulation expected in 2026-2027 continue to underpin positive medium-term equity outlooks, particularly for U.S. large-cap and mid-cap stocks.

Sectoral Leadership: Energy and Industrials at the Forefront

• Energy: Elevated oil and natural gas prices, driven by geopolitical supply constraints and sustained demand, have underpinned sector profitability. Companies engaged in upstream exploration, production, and midstream logistics are reaping the benefits of the price environment, translating into strong earnings and investor interest.

• Industrials: Robust infrastructure initiatives and capital expenditure in transportation, construction, and manufacturing have fueled growth within industrial stocks. The sector's exposure to domestic economic activity and government spending programs provides a natural hedge against external shocks.

Meanwhile, traditionally high-growth sectors such as technology and consumer discretionary retain their long-term appeal given innovation and consumer trends. However, in the current environment of tariff-related uncertainty and inflation pressures, these sectors have not led recent market gains, as investors exhibit caution toward supply chain vulnerabilities and margin pressures.

Strategic Investment Guidance: Balancing Opportunity and Risk

With market volatility expected to persist amid softening economic data and ongoing trade frictions, investment strategists recommend adopting a measured, diversified approach:

• Equity Allocations: Emphasize U.S. large-cap and mid-cap stocks, which are well positioned to benefit from anticipated policy tailwinds and stable domestic demand. These market segments offer a blend of quality, scale, and growth potential attractive in a volatile macro backdrop.

• International Exposure: While global diversification remains important, a tactical underweight in developed international large-cap stocks is advised given the likelihood of a moderation in their recent outperformance, particularly as the U.S. dollar stabilizes and fiscal policies diverge across regions.

• Fixed Income Positioning: Investors should consider underweight allocations in international bonds and U.S. high-yield bonds due to their relatively low yields and historically tight credit spreads. Conversely, extending duration within U.S. investment-grade bonds—specifically in the 7- to 10-year maturity range—can lock in attractive yields ahead of anticipated Federal Reserve rate cuts, offering a balance between income generation and interest rate sensitivity.

Risk and Opportunity: Navigating Volatility with Discipline

Market pullbacks, while unsettling, present strategic opportunities for portfolio rebalancing and selective capital deployment. The fundamental backdrop—anchored by favorable fiscal and monetary outlooks—remains intact, supporting the case for disciplined long-term investing amid episodic volatility.

Brian Therien, Senior Fixed Income Analyst at Edward Jones, highlights the importance of "disciplined fixed income positioning and diversification" as essential components to successfully navigate the evolving market environment. According to Therien, "extending duration in U.S. investment-grade bonds provides an opportunity to lock in attractive yields with potentially less sensitivity to fiscal deficits compared to longer maturities."

Conclusion: Poised for Continued Resilience

Despite the presence of tariff-driven volatility and a slowing economic growth profile, U.S. large-cap and mid-cap equities have exhibited notable resilience, buoyed by sectoral leadership in energy and industrials. Investors are encouraged to leverage market fluctuations as opportunities while maintaining diversified exposure and strategic fixed income allocations that reflect the current interest rate environment.

As the market looks toward 2026 and beyond, tailwinds from fiscal stimulus, easing monetary policies, and deregulation stand to support a reacceleration in economic activity and corporate earnings, reinforcing the rationale for a constructive stance on U.S. equities.

This analysis is informed by the Edward Jones Market Weekly Update and FactSet data as of July 11, 2025.
For further insights and personalized investment guidance, investors should consult with financial advisors and consider their unique financial situations.

Reference: Edward Jones Market Weekly Update

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Market conditions are subject to change, and past performance is not indicative of future results.