Commentary for July, 2025

Hello all - we hope you had a nice July.

This is beginning to sound repetitive - it was another nice month for stocks with very little volatility. The Dow actually saw a decline of 2.2%, but the S&P 500 rose 2.2%, and the Nasdaq, which has a higher concentration of tech stocks, gained 2.4%.

Here’s a look at how the markets moved this month:

Here’s a look at the performance of the various sectors:

The market is seeing less and less volatility.  Here’s the volatility index:

In this chart of the S&P 500, we can see just how little volatility there has been:

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TARIFFS

The tariffs didn’t have much impact on the markets this month.  Note that this commentary focuses on the month of July.  The tariff announcements on August 1 are consequential, but are not part of this commentary.

There were numerous headlines throughout the month where higher tariffs were imposed.  Or lower tariffs were imposed.  Or tariffs were postponed.  But with all the news, the lack of volatility shows how little impact they had on the markets.

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FED

The Fed held another policy meeting this month where they held rates steady yet again.  The lack of a cut was not a surprise for investors. 

 

Many investors seemed to believe the Fed would cut rates at least twice by the end of the year.   In his comments, Fed chief Powell poured cold water on any upcoming rate cuts, citing concerns with the tariffs.  This took investors by surprise and the market feel on these comments.  

Again, this commentary focuses on the month of July.  The economic data released on August 1 have increased the odds of a rate cut, but are not part of this commentary.

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INFLATION

Inflation data out this month showed inflation may be taking a turn higher. 

When we look at inflation on a month-to-month basis, prices continue to rise.

When excluding energy and food from the calculation (which economists call the “core” measurement), inflation rose steadily yet again.

Inflation at the business level continues to bounce around and was essentially flat this month.  This inflation level tends to lead the CPI, so hopefully we’ll see inflation slow down (or even move lower).

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OTHER ECONOMIC DATA

Other economic data released this month showed an economy that continues to chug along.

First, and most importantly, was the GDP report for the second quarter which shows the strength of our economy.  

All eyes were on this report after the slight decline in the previous report.  The results were solid, with the economy growing a healthy 3%.

While 3% was a solid number, under the surface it was a little “funky.”  Companies rushed to beat the tariffs by importing a lot of products before tariffs were imposed, which has skewed the recent figures.  The most recent report showed a modest gain in exports from the US, and a massive decline in imports. 

It may take a couple quarters for these figures to get back to “normal.”   

As for a more granular look at the economy, both the manufacturing and service sides of our economy saw modest gains.

Retail sales moved higher:

Durable goods (these are items with a longer life, like a phone or refrigerator) also saw a sharp drop.  However, when excluding the transportation sector which saw several large plane orders the previous month, durable goods sales were roughly flat.

Consumer confidence moved slightly higher.

However, small business owners were slightly less optimistic. 

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CORPORATE EARNINGS

A little more than half of the companies in the S&P 500 have reported their earnings and the results have been pretty decent.  The large tech companies, in particular, continue to see strength.

Earnings are on pace to grow over 6% and revenue (sales) stand at about 5%, so companies seem to be doing well.  

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Where does the market go from here?

We seem to be at very high levels in the markets here and wouldn’t be surprised to see markets pull back at some point.  However, markets continue to chug higher, and there hasn’t been a reason for investors to sell yet.

From a historical perspective, many indicators tell us stocks are expensive.  One indicator is the “Buffett Indicator”  which looks at the level of stocks compared to the strength of the economy.  This indicator has never been higher, which suggests stocks are overvalued.

The “smart money” (institutional investors) and “dumb money” (individual investors) are at opposite extremes, with the “smart money” very pessimistic.  This suggests the markets may be too high. 

However, companies continue to buy back their own stock at a record pace, which is a strong tailwind for stocks.

So while stocks may be high here, the market remains driven by activities out of Washington and that makes any predictions difficult.  




This commentary is for informational purposes and is not investment advice, an indicator of future performance, a solicitation, an offer to buy or sell, or a recommendation for any security. It should not be used as a primary basis for making investment decisions. Consider your own financial circumstances and goals carefully before investing. Past performance cannot guarantee results.

Commentary for June, 2025

Hello all - we hope your June was a nice one.  Hard to believe the year is halfway over.

It was another nice month for stocks, too. Aside from a short focus on fighting in the Middle East, it was a fairly uneventful month for the markets. The Dow saw a gain of 4.3%, the S&P 500 rose 5.1%, and the Nasdaq, which has a higher concentration of tech stocks, added a solid 6.1%.  

The second quarter has come to an end, too.  The S&P had its best quarter since 2023 and the Nasdaq had its best quarter since 2020.

Here’s a look at how the markets moved this month:

Here’s a look at how the various sectors performed:

Volatility continues to cool.

Bonds also continue to cool, signaling fears fading from investors.

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TARIFFS

The tariffs were a non-issue for the markets for most of the month.

However, late in the month, you started to hear more investors concerned about the July 9th trade deadline that is quickly approaching.  No one wants to see another market drop like we saw in the first round of tariff talks.  

The fears were put to rest when the Trump administration deemphasized the July 9th deadline. The markets rose as a result. 

Then – the very next day – the Trump administration renewed tariff worries as they called off all tariff talks with Canada.  While it eventually worked out in our favor, the trade uncertainty is not gone and we may see more volatility as a result.

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FED

The Fed held another policy meeting this month where they held rates steady yet again. 

The lack of a cut drew the ire of the Trump administration who are anxious for lower borrowing rates.  In fact, nearly all other major central banks around the globe are lowering rates.  

The chart below shows the number of rate cuts by other central banks on any given month, while we do not cut.

Here’s another way to look at the other central banks cutting their rates:

We’ve used the picture below a lot recently as a reminder.  The Fed likes to tout its independence, but they are all highly political, far-left leaning academics.  

Remember, former Fed chief Janet Yellen became the Biden Treasury Secretary.  Former Fed Vice-chair Lael Brainard became Biden’s head of the National Economic Council. We think politics alone will be the reason preventing them from agreeing with anything in this administration. 

Looking ahead, investors are still expecting rate cuts this year, with the market pricing in more than two cuts between now and the end of the year.  Many investors see a cut as soon as July.  We don’t think the odds of a cut are very good right now and the market may be disappointed and fall as a result.

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INFLATION

Inflation is no longer trending lower, but has yet to really turn higher.

When we look at inflation on a month-to-month basis, prices rose slightly.

When excluding energy and food from the calculation (which economists call the “core” measurement), inflation rose slightly again, too. 

Inflation at the business level had seen a couple months lower, but took a slight turn higher last month.  This inflation level tends to lead the CPI, so it may signal more inflation coming in the CPI reports.

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OTHER ECONOMIC DATA

Other economic data released this month was mixed, though mostly lower.  

The manufacturing part of our economy saw another decline, while the service sector turned lower and is now slightly contracting. 

Retail sales moved lower: 

Durable goods (these are items with a longer life, like a phone or refrigerator) also saw a solid gain.  However, excluding the transportation sector which had several large purchases, the increase was only 0.5%.

Consumer confidence took a turn slightly lower.

Meanwhile, small business owners were slightly more optimistic. 

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Where does the market go from here?

We are on the expensive side in the short term and would be cautious putting new money in here.  However, the market remains driven by comments from Washington, so it’s hard to make any firm predictions.

This commentary is for informational purposes and is not investment advice, an indicator of future performance, a solicitation, an offer to buy or sell, or a recommendation for any security. It should not be used as a primary basis for making investment decisions. Consider your own financial circumstances and goals carefully before investing. Past performance cannot guarantee results.

Commentary for May, 2025

Hello all - we hope you had a nice May.

Markets felt a little more normal this month and stocks saw a solid rise.  For May, Dow gained 3.9%, the S&P 500 rose 6%, and the Nasdaq, which has a higher concentration of tech stocks, added a solid 9.6%. 

Both the S&P and Nasdaq had their best month since 2023 and the S&P had its best May since 1990!

Here’s a look at how the markets moved this month:

Here’s a look at how the various sectors performed:

Volatility rose sharply last month, but cooled considerably in May.

Bonds made headlines early this month as yields rose and some investors were concerned it signaled trouble ahead.  However, yields turned lower later in the month and the fears were alleviated.

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TARIFFS

The tariffs were again front and center this month.  The rhetoric coming from Washington was a bit calmer which allowed markets to rise. 

Tariff rates were lowered on China as the negotiations continued and markets rose on the news.

Markets fell, however, on threats for higher tariffs on EU countries.  

A court ruling against the tariffs also had a positive effect on the markets.  However, it looked like it would be possible for Washington to find other ways to authorize the tariffs, so the gains were short-lived.

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FED

The Fed held another policy meeting this month where they held rates steady again.

Investors are still expecting rate cuts this year, with the market pricing in more than two cuts between now and the end of the year.

We think it is very unlikely there will be two cuts by the end of the year.  We doubt there will be any cuts at all, which will be a disappointment for investors and could weight on the market.

Though the Fed likes to tout its independence, they are all highly political, far-left leaning academics.  We think politics alone will be the reason preventing them from agreeing with anything in this administration. 

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INFLATION

Inflation still appears to be trending lower, but concerns remain as the tariff effects have yet to be truly felt. 

When we look at inflation on a month-to-month basis, prices rose slightly.

When excluding energy and food from the calculation (which economists call the “core” measurement), inflation rose slightly, too. 

Eggs prices had been a hot topic, but those prices showed a strong decline last month.  This is probably why we haven’t heard much about them in the press.

Another good sign was inflation at the business level, which showed a decent decline.  This inflation level tends to lead the CPI, so perhaps we’ll see a cooling in prices at the retail level soon. 

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ECONOMY

After a negative GDP report for the first quarter was released last month, investors have been worried that a recession may be approaching.  However, estimates for the next GDP report actually showed a strong increase. 

A lot of the reason for the decline in the last GDP was companies importing a lot of products before the tariffs hit.  Imports are counted as a negative for GDP, and this alone is the reason for the decline in GDP.  That isn’t this case this quarter, so things may not be as bad as they seem.  

We still see some concerns out there, though.  While the fundamentals still look decent, we think the high prices people face everyday may eventually take their toll.  We’re seeing people getting behind on their credit cards and car loans, and this can be the canary in the coal mine. 

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OTHER ECONOMIC DATA

Other economic data released this month was mixed.  

The manufacturing part of our economy saw another decline, while the service sector showed an improvement. 

Retail sales rose slightly. 

Durable goods (these are items with a longer life, like a phone or refrigerator) also saw a slight increase.

Consumer confidence saw a nice bounce after plunging the previous month.

However, confidence among CEO’s dropped sharply. 

Small business owners, too, were less optimistic. 

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EARNINGS

Earnings for the first quarter have largely wrapped up and the results have been very good.  

Analysts predicted a 7% gain in earnings for the companies in the S&P 500, but the final result was a 13% gain. That’s pretty good.  However, there remains a concern going forward.  The outlook has been very cloudy and there remains a lot of worry, so the bar has been set very low.  

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Where does the market go from here?

The market remains driven by comments from Washington, so it’s hard to make any predictions here.  The market looks a little expensive here in the short term, so we’d be more cautious at this point.  



This commentary is for informational purposes and is not investment advice, an indicator of future performance, a solicitation, an offer to buy or sell, or a recommendation for any security. It should not be used as a primary basis for making investment decisions. Consider your own financial circumstances and goals carefully before investing. Past performance cannot guarantee results.