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July continued the upward market momentum. The month was carried by the Technology sector. Specifically, the AI companies and those that support. Microsoft and Nvidia carried the load, while META played catchup at the end of the month with an outstanding earnings print. Amazon worked higher into the earnings release and then gave back July’s gain with lighter 2025 guidance. Apple turned in solid earnings but flatlined for the month, is down for the year and is essentially trading at August 2024 levels. Tesla is down and Alphabet is slightly positive for the year. After Technology (+5.56%), Utilities turned in the best July performance (+5.27%), Industrials (+3.30%) followed. Healthcare (-3.37%) and Consumer Staples (-2.64%) brought up the rear. S&P 500: July +2.17% YTD +7.79% Sector Performance YTD: Communication Services +13.17% Current U.S. Treasury Yields: 6 Month Bill 4.10% The Economy and the Fed: Fed Chair Powell once again kept rates unchanged (4.25%–4.50%) at the July FOMC policy meeting. Two Fed governors (Christopher Waller and Michelle Bowman) dissented, which was the first time since 1993, preferring a rate cut. The two make a compelling case. Released on Friday were nonfarm payroll numbers. The number was weak at 73,000 jobs added. As well, both May and June were revised down by 258,000 jobs. The labor market is weakening. Tariffs, and the uncertainty they create, have delayed the Fed from lowering rates. The concern is an uptick in inflation. The month ended with the minimum reciprocal tariff rate set at 10%. Neutral Fed positioning would see rates at the 3% level. Monetary policy is still in restrictive territory. The latest GDP, payroll and unemployment rate data suggest the economy is slowing. The U.S. economy is nowhere near recession. Easing should be on the table in September. Looking Ahead: 34% of the S&P 500 companies have reported earnings. 80% have beaten earnings estimates and on revenues. Financials, Communication Services and Information Technology were the biggest contributors to growth. Communication Services and Healthcare led on revenue. Growth is printing at 6.4% and revenues at 5% thus far into earnings season. We expect day to day volatility. Typically, in August the markets are placid. Historically, September is weakest month. Portfolio rebalancing and tax-loss harvesting begin to kick in and active trading picks up with the end of summer. Stock picking remains key to portfolio positioning. Ignoring noise in the short-term has proved beneficial to investment holdings. We remain confident in positions tuned to the AI Technology theme and the supportive Industrial names. As well, Financials have more to offer with lower regulatory restrictions and rates. Cybersecurity remains important to not only investment positioning but also to our daily lives. Markets will continue to work higher into year-end. |
