Commentary for August, 2025

Hello all - we hope you had a nice August.

It was yet another month in the green for stocks. The Dow posted a gain of 4.0%, the S&P 500 added 2.0%, and the Nasdaq, which has a higher concentration of tech stocks, rose 3.0%. 

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

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

We saw a little more volatility at the beginning of the month, but that volatility subsided quickly.

The market continues to trade in the tight range we’ve seen the last several months.

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TARIFFS

It seems like a long time ago, but August opened with new tariff announcements from the Trump administration.  Some countries saw higher tariff rates while others saw lower rates.  

For the longest time, tariffs kept getting delayed and the market didn’t pay much attention.  The realization that the tariffs are here and are now implemented helped the market sell off strongly on the news. 

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NVIDIA

Earnings from Nvidia was a highly-anticipated event this month.  We don’t often talk about individual stocks, but Nvidia, whose chips are used in AI supercomputers, is the largest weighted stock in the market and it sets the tone for the direction of the market.

The company released earnings and while they still showed strong growth, they weren’t growing as fast as before.  Additionally, they anticipated slower growth ahead. 

The hype around AI has been a big driver in the markets recently, sending tech stocks in particular to record highs.   While the AI hype is still here, the excitement may be starting to cool down. 

As goes Nvidia, so goes the market.  The stock faded into the end of the month and the broader market tagged along, too.

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FED

Later in August, the market saw solid gains on news out of the Fed that rate cuts were likely in September.  

The Fed held their annual “Economic Symposium” in Jackson Hole, where they don’t implement any new policies at that time, but discuss the conditions and their outlook.  Fed chief Jay Powell cited the weakness in the jobs market as a reason for possibly lowering rates.  

It’s the most ‘dovish’ Jay Powell has been in a long time and the market saw it as a green light to go higher.

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EMPLOYMENT

The worry about the employment picture cited by Jay Powell was due to the economy adding only 73,000 jobs last month.  Additionally, the figures from the previous two months were revised sharply lower.

Adding to the volatility, President Trump weighed in citing manipulation by the bean counters and ordered the head of this division to be fired.

While the large and frequent revisions in these number do suggest something is wrong, declaring it manipulation and replacing the head of the department raises questions about quality of all economic data going forward.  This will only lead to more volatility in the future.  

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INFLATION

Inflation data out this month showed inflation may be getting warmer. 

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 showed a surprisingly high jump over the past month.  This inflation level tends to lead the CPI, and investors are worried that the tariff costs are starting to work their way into the system. 

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OTHER ECONOMIC DATA

Other economic data released this month showed an economy that continues to grow, though slightly.

With a more granular look at the economy, both the manufacturing and service sides of our economy saw modest declines.

Retail sales moved higher: 

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

Consumer confidence moved slightly lower.

However, small business owners were slightly more optimistic. 

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Where does the market go from here?

Stocks seem slightly overvalued here in the short run, but the trend has been steadily higher.  However, we are entering a historically volatile time of year, so caution is warranted. 

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 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.