July 28, 2025
Investors have been “cruising down the highway in (their) fine machine(s).” Whether using one of the many leveraged ETFs, one-day options, or the latest “meme” stock, investors have been cruising. Will there be a bruisin’ in the future? Most certainly, but it is the “when” that no one has figured out. Earnings season kicks into high gear next week with four of the Mag 7 stocks reporting. Last week saw a couple of tech names report mixed results. Similar results across other industry groups, some impacted more by tariffs, others not so much. Hidden in plain sight was the return of “meme” stocks, some jumping by over 100%, then falling back to earth. All without news or earnings from the likes of Krispy Kreme and Kohl’s. Through it all, stocks rose steadily, finishing each trading session at new all-time highs. Since the beginning of June, the number of up days in the markets has been twice the number of down days. Will that persistence continue? Typically, the flip of the calendar to August/September marks at least a short-term peak in stocks, but the momentum is on the bullish side until proven otherwise. For stocks, it is time to keep on truckin’.
The very public and much-anticipated visit to the Federal Reserve by a sitting president (one of only four in history) was full of the usual barbs, corrections, and one more jab to get interest rates lower. The Fed meets this week to determine the level of interest rates until their next meeting in September. Rates will likely stay put, as the inflation data remains above the Fed’s target. The full impact of tariffs may not have been felt yet, and theoretically could push inflation up through year-end. This week marks the selfimposed deadline for tariff agreements. Plenty have been announced, but notably missing are those with Canada, Mexico, and China. What happens as the deadline passes is anyone’s guess, but there has been some propensity to push out deadlines further still. Friday will also have the jobs report, which will be watched very closely for signs that the labor market is weakening. Thus far, job creation has been good, as the weekly claims remain well within their historical range, which has marked a strong job market. As long as the number of new jobs is in the 125-150k range, it should lend credence to a Fed staying on hold. Much below 100k, voices will be raised to cut rates. A few “givens” for the Fed meeting: As much as the governors have their own opinion when chatting with the press, the voting is likely to be unanimous to hold rates steady. The other given, stocks and bonds, will be volatile during Chair Powell’s press conference following their decision. He will be pressed about resigning, worries about tariff inflation, and their read on the economy. A summer Fed Day is usually a good beach day, as whiplash is a feature of the Fed Day.
Interest rates continue to garner plenty of focus. Lower rates could save the government plenty in interest payments and help home buyers. There is fear that lower rates could keep inflation from reaching (and maybe getting below) the Fed’s target of 2%. Over the last six months, the CPI is rising at a 2.5% annual rate, commodity prices have perked up, and the aforementioned tariff prices have not likely been taken into effect. The last mile of inflation to the desired 2% level remains somewhere well beyond the hood of the car.
The historic rise from the tariff lows by stocks, especially technology, has slowed over the past few weeks. June saw four days with SP500 moves of 1% or more in either direction, July none so far. Though there were four days of less than 0.1% moves. It seems the dog days of summer have hit the market early. The persistent rise in the markets has pushed many asset classes to levels that mark bumpier roads ahead. Until proven otherwise, the path of least resistance remains higher, but the yellow warning flags are beginning to be seen. It does not mean stocks are tanking from here, but a well-deserved break is certainly warranted. The huge run by technology stocks and their large weight in the popular indices could mean that “other” parts of the market do well in the months ahead. Just maybe this time, small stocks begin to outperform. They have at least kept up with the SP500 over the past two months, although it was last in 2022 that small did better than large. The same can be said about “value” stocks vs. “growth”; the last time of meaningful outperformance by value was 2022.
There will be plenty to watch this week, from a full calendar of earnings to the Fed meeting. Wrapping up the week will be the jobs data. Once through the week, it will be time for a vacation!
The opinions expressed in the Investment Newsletter are those of the author and are based upon information that is believed to be accurate and reliable but are opinions and do not constitute a guarantee of present or future financial market conditions.