The following is an excerpt from Zacks Chief Strategist John Blank’s full Jul Market Strategy report To access the full PDF, click here.

Think there are no signs of tariffs inside the current U.S. macro system?

Think again!
 

I. Introduction

Each month, I highlight a section found within the latest Zacks Market Strategy report.

In the month of JULY?

I highlight the Institute of Supply Management’s (ISM) manufacturing purchasing manager indices (PMI). Striking tariff dynamics caught my attention!

Note: 50 is the rubicon between expansion and contraction.

(1) The ISM Prices sub-index at 69.7 is consistent with higher tariffs.

(2) These five ISM sub-indices are also consistent with a higher tariff regime: 

• New Orders at 46.4
• Backlog of Orders at 44.3
• New Export Orders at 46.3
• Imports at 47.4, and 
• Employment at 45.0

Most are contracting for the last 4 to 5 months. That too is consistent with policy actions.

(3) Finally, every single ISM respondent mentioned tariffs in their response. 

Carefully read what is written, by the various purchasing managers.
 

II. WHAT ISM RESPONDENTS ARE SAYING

“Business has notably slowed in last four to six weeks. Customers do not want to make commitments in the wake of massive tariff uncertainty.” [Fabricated Metal Products]

“Middle East unrest as well as unstable long-term tariff positions continue to impact second- and third-tier sources, which is applying pressure to material costs. Costs are up 6 percent to 10 percent over budgeted inflation — and the forecast accounted for the volatility expected with the current administration.” [Wood Products]

“The biopharmaceutical space is starting to see more pronounced headwinds: Stock prices have significantly eroded, companies are facing hiring freezes, and so on.” [Chemical Products]

“The tariff mess has utterly stopped sales globally and domestically. Everyone is on pause. Orders have collapsed.” [Machinery]

“Tariff volatility has impacted machinery, steel and specialized components. Also, potential shortages of skilled labor for construction, maintenance and installation.” [Food, Beverage & Tobacco Products]

“Tariffs continue to cause confusion and uncertainty for long-term procurement decisions. The situation remains too volatile to firmly put such plans into place.” [Computer & Electronic Products]

“Tariffs continue to impact material pricing.” [Petroleum & Coal Products]

“Tariffs, chaos, sluggish economy, rising prices, Ukraine, Iran, geopolitical unrest around the world — all make for a landscape that is hellacious, and fatigue is setting in due to dealing with these issues across the spectrum. Unfortunately, this is just the beginning unless something drastically changes, but the supply chain implications will grow — depots will not be stocked, less material will be available, and it will take years for domestic production to handle the needs (if companies even want to).” [Primary Metals]

“The geopolitical environment remains volatile: (1) ongoing shifts in U.S. tariff policy make it difficult to plan, (2) emerging conflicts in the Middle East could pose long-term commodity risks and (3) China measures on rare earth materials are causing challenges. Overall outlook for our company is positive; it’s just extremely hard to make near-term supply plans/strategies or budgets.” [Miscellaneous Manufacturing]

“The word that best describes the current market outlook is ‘uncertainty.’ The erratic trade policy with on-again/off-again tariffs has led to price uncertainty for customers, who appear to be prepared to hold off large capital purchases until stability returns. This has resulted in further reductions in customer demand and softening sales for the balance of 2025. Operations has planned additional weeks of downtime at multiple plants to accommodate reduced orders. Next year’s forecast is not any better at this point. Additionally, most electric vehicle (EV) projects have been delayed or canceled, resulting in a significant amount of unutilized capital investment. EV technology launches for 2026-28 have been delayed past 2030.” [Transportation Equipment]

Now, let’s study the latest Zacks Industry Ranks. These mid-summer rankings turned out to be surprisingly strong.
 

III. Zacks JULY 2025 Sector/Industry/Company Telescope

June 30th, 2025 data showed a positive pre-Q2 earnings Zacks Industry Ranking.

This supplies three Very Attractive Sectors: Industrials, Info Tech, & Utilities.

Info Tech (and likely Utilities) earnings growth is well-supported by “AI” data/cloud centers and strong tech mega-cap earnings. 

Four sectors are now at Attractive: Consumer Staples fell to Attractive. Financials and Materials stayed at Attractive. Communication Services rose to Attractive.

Health Care stayed on at an Unattractive rating.

Consumer Discretionary and Energy sectors held onto Very Unattractive ratings.

(1) Industrials stayed at Very Attractive. Aerospace & Defense, Pollution Control, Business Products, and Business Services looked strong.

Zacks #1 Rank (STRONG BUY): Heico (HEI Quick QuoteHEI - Free Report) . An FAA-approved jet engine and aircraft component replacement parts.

(2) Info Tech rose to Very Attractive from Attractive.  Misc. Tech and Electronics led.

Zacks #1 Rank (STRONG BUY): Dell Technologies (DELL Quick QuoteDELL - Free Report) . A leading provider of servers, storage and PCs.

(3) Utilities rose to Very Attractive from Attractive. Utility-Water Supply looked the best.

Zacks #1 Rank (STRONG BUY): France’s ENGIE Sponsored ADR (ENGIY Quick QuoteENGIY - Free Report) . A multi-faceted power supplier

(4) Consumer Staples fell to Attractive from Very Attractive. Soaps & Cosmetics, Agri-business, and Misc. Staples were strong.

(5) Financials stayed at Attractive. Investment Funds and Major Banks looked the best.

(6) Materials stayed at Attractive. Metals-non-Ferrous and Steel look good. Again.

(7) Communications Services rose to Attractive from Market Weight. Telco Services was best.

(8) Health Care stayed Unattractive. Medical Products were best, at market perform.

(9) Consumer Discretionary stayed at Very Unattractive. Home Furnishing-Appliances looked good.

(10) Energy stayed at Very Unattractive. Oil and Gas, E&P was best, at market perform.

In the coming weeks, the Q2 earnings season company reports will flood the zone.
 

IV. Conclusion

Does Zacks see any sign of tariff effects, too?

I think the answer is YES.

Here is what Zacks Research Director Sheraz Mian wrote, on June 27th, 2025—

Since the start of April, Q2 earnings estimates have declined for 13 of the 16 Zacks sectors.

Zacks latest expectation is for Q2 earnings to increase by +5% from the same period last year, on +4% higher revenues.

This will be a material deceleration from the growth trend of recent quarters, and it will be the lowest earnings growth pace, since the +4.3% growth rate in Q3-23.

That Zacks earnings update sounds consistent with the ISM materials.

Nonetheless, the Zacks Industry Ranking tables look strong this month.

Stay tuned.

Enjoy the rest of my Zacks JULY 2024 Market Strategy report.

John Blank, PhD.
Zacks Chief Equity Strategist and Economist