Stocks fended off the worst price dip since April’s sell-off before setting new highs before mid-month.
Leadership rotated away from U.S. growth stocks and the technology sector as small caps (Russell 2000) and value stocks fell into favor. International markets continue their uptrend, outpacing all U.S. composites year-to-date.
Time to Cut Rates
The Federal Reserve has signaled that they are prepared to start cutting interest rates as soon as their next meeting on September 17.
Unemployment sits relatively low at 4.2%, yet many economists worry that slower growth paired with inflation pressures will lead to unintended consequences if policymakers lower rates. At a household level, reports point to softer spending as debt piles up and prices remain high.
Corporate earnings remain resilient after reporting a largely positive second quarter.
Pro-Business Tax Moves
The “One Big Beautiful Bill” Act (OBBBA) offers extensive tax savings to American businesses through major provisions that expand deductions and tax credits.
Companies can now fully and immediately expense most depreciable assets (e.g., equipment and machinery) rather than deducting the cost over multiple years. To incentivize onshore innovation, the OBBBA also reinstates 100% upfront deduction of domestic research and development costs.
It is estimated that Meta Platforms could see up to $11 billion in tax savings this year, while Amazon could save $16 billion, according to The Wall Street Journal.
Flagging Investor Sentiment
Despite the all-time highs, investor sentiment, which reflects the collective optimism or pessimism of market participants, has diverged since the frenzied April recovery.
Underwhelming enthusiasm doesn’t exactly point to a strong market environment. A flashpoint may be emerging. Additionally, we have entered a historically weak time of year, and it’s as important as ever to have an exit strategy.
Bottom Line
The FSA Safety Nets® are designed to yield results over the long term. Experience has shown that a consistent, well-built plan does the work for you.
As always, please reach out to your advisor to discuss any concerns or ideas you have regarding your investment objectives and how we manage your money. Thank you.
Jordan Daugherty, CFA, CMT
Senior Investment Analyst
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