July 28, 2025

“Ultimately, nothing should be more important to investors than the ability to sleep soundly at night.”

Seth Klarman

Another good week and hopefully good sleep! Here are the numbers. The S&P 500 rose 1.33%, the Dow Jones Industrial Average added 1.20%, The Nasdaq struggled but managed to finish up .71%. Internationally, the FTSE 100 had a good week up 1.43% and the broader MSCI-EAFE gained 1.80%. The 2-year Treasury paid 3.921% and the 10-year yield was 4.386%.

So, what happened outside of losing Ozzy Osborn and Hulk Hogan? The S&P 500 last Friday logged a fifth straight record close — hitting a new high for each day of the past week, a feat it hasn’t accomplished since November 2021. The Dow Jones Industrial Average, meanwhile, has yet to claim a record high in 2025. “I think it is more a reflection of the makeup of the companies within the Dow and the companies within the S&P 500 — I don’t think it’s a reflection of bad times to come,” Sam Stovall, chief investment strategist at CFRA Research, told MarketWatch in an interview.

Overall, U.S. stocks ended mixed last Friday as investors weighed tech’s promise against near-term risks. Shares of semiconductor and cloud-infrastructure names held up on optimism around AI and high-ROIC businesses, and quantum computing plays extended a summer rally on progress toward commercial applications. Tesla, however, lagged the group despite a social-media endorsement from President Trump, after the EV maker warned of “rough quarters” ahead and reported disappointing quarterly results. We still believe Tesla will remerge in the coming months.

Financials and healthcare came under pressure amid fresh developments. UnitedHealth Group confirmed it’s cooperating with federal criminal and civil probes into its Medicare business, denting insurer shares in afternoon trading. Meanwhile, declining Treasury yields and expectations of Federal Reserve rate cuts later this year have increased interest-sensitive dividend stocks. Additionally, the European Central Bank’s decision to keep rates unchanged contributed to the bond-yield rally, which is reshaping income-focused portfolios. The threat of U.S. tariffs on the EU heightened trade uncertainty, particularly affecting export-dependent companies.

Speaking of Tariffs, the US Treasury has received so much additional money the administration is toying with the idea of a rebate to lower income level taxpayers as a stimulus the balance to deficit reduction. With an Aug. 1 deadline approaching, the United States has reached a trade agreement with Japan, U.S. President Donald Trump announced on social media on July 22. As a part of the deal, Japan will open to U.S. trade on items such as cars and trucks, rice, other agricultural products, and “other things. The East Asian nation will also pay reciprocal tariffs to the United States at a rate of 15 percent. This along with India will continue to strengthen US economic dominance in China’s back yard. Additionally last week, President Trump confirmed the details of the U.S.–Indonesia trade agreement. Under the deal, Indonesia will lower tariffs to zero percent on 99 percent of U.S. exports and eliminate non-tariff barriers, the president said in a Truth Social post on July 21. Indonesian products entering the United States will be subject to a reciprocal tariff rate of 19 percent, down from the previously announced blanket rate of 32 percent. Indonesia will also supply the United States with precious critical minerals and purchase American farm products, energy, and Boeing aircraft. “This deal is a huge win for our automakers, tech companies, workers, farmers, ranchers, and manufacturers,” The President said.

The result? Wall Street’s so-called fear gauge dropped last week as U.S. stocks continued to set record highs, with investors appearing encouraged in part by the White House’s progress on the global trade front.

As we are in Earning season, Barron Sabrina Escobar reports a lukewarm reception. Investors weren’t too impressed with the latest slate of second-quarter earnings. While many companies were able to deftly navigate an undoubtedly chaotic quarter, markets seemed to be expecting more. General Motors, D.R. Horton, and PulteGroup all had solid quarters, meeting or beating earnings and revenue expectations. While shares of both home builders soared on the beat, GM stock fell 8% after the company said tariffs cost it about $1.1 billion over the quarter.  Coca-Cola and Philip Morris topped earnings expectations, but their sales fell slightly shy of consensus estimates, also sending shares lower.  Sherwin-Williams and Lockheed Martin closed last Friday session in the red, as well, after they posted big earnings misses — the former because demand was weak, and the latter because of a bevy of one-time charges that weighed on the bottom line.  Without a clear pattern emerging, investors may be playing it safe ahead of the remaining earnings reports. The S&P 500 hovered around the breakeven point for most of the day Friday, eventually closing 0.1% higher and marking a new record. The tech-heavy Nasdaq Composite fell 0.4%, while the Dow Jones Industrial Average rose 0.4%, as Tech stocks struggled, the broader market actually performed quite well. As for small caps In July, small-cap and cyclical stocks have quietly staged a breakout — flipping the script as the second half of 2025 tilts in favor of some of the most economically sensitive segments of the stock market.

Internationally, a significant move is underway, the American administration is likely to impose further sanctions that would make it more difficult for Russia to continue the war, though at some cost to the supremacy of the American dollar. In addition to the normal economic sanctions, there might be a further cutting-off of Russia from the SWIFT system, which would significantly impede Russia’s weak banking system. If the war ended, there would be a massive rebuilding effort in Ukraine and eventually a resumption of flow of energy from Russia, which would help both Russia and Europe. So, we shall see if President Trump can pull this off and remove a thorn in his side.

Finally, durable goods dropped but remains solid and the Fed will meet on interest rates. All eyes will see if the “visit” to the cost overrun project at the Federal Reserve will do anything to move the FED Chairman into the reduce interest rate crowd. the Federal Open Market Committee will announce its July interest-rate decision this Wednesday. Despite calls from the President for Chairman Jerome Powell to cut rates, traders see just a 2.6% chance of such a cut next week, according to the CME FedWatch Tool. Odds of a September cut are much higher at 64.1%.

Mike