Software Index

State of the Market

In July, equity markets demonstrated resilience in the midst of legislative and policy shifts. The Nasdaq closed at a new record on July 15, marking its eighth all-time high of 2025. This surge was driven by tech leaders like Nvidia, fueled by AI momentum. The S&P 500 also set multiple records, supported by solid earnings outlooks and easing inflation in select areas. Bitcoin surpassed $120,000 on July 14, driven by U.S. regulatory hopes during 'Crypto Week'.

The One Big Beautiful Bill was signed on July 4. It delivers permanent tax cuts, Medicaid limits, and federal spending redirects. The bill promises growth through tax relief for businesses and workers, but it could widen deficits and intensify long-term debt concerns.

Trade pressures are building toward an August 1 deadline for tariffs up to 30-40% on imports like drugs, chips, and goods from the EU, Mexico, and China, absent new trade deals. These pressures likely contributed to June’s CPI, which rose 0.3% monthly and 2.7% yearly. That annual rate was above estimates and the highest since February, due primarily to food and housing costs. In contrast, the Producer Price Index (PPI), a measure of wholesale costs, showed no monthly change in June. On an annual basis, PPI inflation slowed to 2.3% from 2.7% in May. This suggests that wholesale price increases are cooling faster than consumer prices, potentially reducing upward pressure on future inflation. At the same time, it highlights the uneven effects of tariffs across different stages of the supply chain.

Expectations for Fed rate cuts are muted for July, with near-zero odds, but they rise to 60% for September. These odds are shaped by inflation expectations and calls for bolder moves. June unemployment fell to 4.1% with 147,000 jobs added, though the pace was slower than in prior months.

In software, an intense AI hiring spree is dominating news as tech giants fiercely compete for high-level talent to build future AI capabilities, with Meta leading by poaching top executives like Apple’s AI models leader and offering packages up to $100-300 million to attract researchers from OpenAI, Google, and others. Google countered with a roughly $2.4 billion move to hire leaders from the AI coding startup Windsurf, underscoring the talent war.

Overall, equity markets and economic indicators reflect cautious optimism amid legislative boosts and recovering growth. However, persistent trade uncertainties and fiscal risks could temper gains, particularly if tariff escalations disrupt supply chains or inflation lingers. The software sector’s AI-driven talent competition signals robust long-term potential but also highlights workforce transitions that may exacerbate near-term volatility. Investors should monitor Fed actions, tariff negotiations, and AI developments closely as these factors converge to shape a potentially dynamic late-summer landscape.