How Low Can Stocks & Crypto Go? August 4th, 2025
Tariffs, Jobs, earnings and inflation are in focus
Bottom Line: My first rule of money... Never let your money and emotions cross paths. This story is a weekly wake-up call to show you the near-worst-case scenario for stocks and crypto. Why? So, you can plan your financial future with a cool head, not a racing pulse. The odds of a near-worst case outcome almost certainly won’t happen, however if your plan accounts for it – it can help you manage through even the most trying markets like what we’ve experienced this year.
The US stock market is history’s ultimate wealth-building beast. Crypto? It’s minted millionaires from early believers. Fact: Over 90% of the time, investors who try to “time” the market end up poorer than if they just stuck to their original investments. This is about dodging that trap.
Here’s how the big three indexes are faring in 2025 so far:
- DOW: +3% (-3% last week)
- S&P 500: +6% (-2% last week)
- Nasdaq: +7% (-3% last week)
The immediate reaction in the financial markets to Friday’s ‘Liberation Day 2.0’ as President Trump raised tariff rates as promised on dozens of countries which lacked new trade deals with the U.S., was similar to the first – selling. While losses weren’t on the scale to what we saw in early April, yet again investors seemed surprised by President Trump’s follow through on what he’d promised. Side-stepping that aspect of things, by my calculation higher tariffs have been imposed on approximately 38% of imported goods into the U.S. This comes as the Federal Reserve didn’t budge on interest rates, as expected last week, but also as an extremely weak jobs report on Friday raised immediate concerns about the relative strength of the U.S. economy in real-time.
In the end, what was to be a big week of economic news, which was expected to provide greater clarity, perhaps did just the opposite. It figures to be an interesting week on Wall Street as investors sort out their thoughts about all of this.
As for earnings...
With 66% of companies having reported, earnings growth has paced 10.3% year-over-year, which is nearly double what had been expected. This dynamic helped the market continue to reach a series of record highs prior to the late week news driven selloff.
As for cryptos...
The risk off, selloff hit cryptos last week as well, with an across-the-board decline in the digital currency space.
Here’s a look at where they stand.
- Bitcoin: -4% last week +21% YTD
- Ether: -10% last week +4% YTD
- BitwiseETF (Top 10 cryptos): -5%, last week +13% YTD
I can’t value cryptos because they have no inherent value. Stocks, though? They’ve got bones. Let’s break down the S&P 500:
- Current P/E: 29.74
- Historic Avg. P/E: 16.16
Translation: On earnings alone, the maximum downside risk is a 46% drop from here—a little less than last week as stock prices declined faster than fundamentals. The market is still somewhat historically expensive; we have seen a 2% improvement in the fundamental value of the market during this market cycle.
So, What’s Your Move?
If a 46% dip wouldn’t derail your life, you’re probably golden. If it would? Time to call a pro and build a plan that doesn’t leave you sweating bullets—or making mistakes.