Keeping in touch with a few Mid-Summer words….

Charlie Munger said: “Knowing what you don’t know is more useful than being brilliant.”

In this business, we tend to separate financial market behavior into quarters and half years. By now, you have likely read and witnessed that it was an interesting first half to this year 2025.  After starting off well, we experienced a solid good “awakening” in February and March as the now somewhat famous Liberation Day tariffs were announced by the President and this sent the markets into a concerning tailspin. It was one of the largest corrections in market history, but short-lived.  As the President eased up and, in many cases, reversed or postponed course, the markets rebounded and settled into a decent resumption of upward momentum.  Everything, of course, still being led by AI related tech stocks.  However, it was good to see a broader participation in the markets by other sectors. Diversified portfolios performed well.

Ahead will be the likely return of tariffs in some form after the 90 day reprieve, as well as second quarter earnings reports that will begin to reflect how much uncertainty has existed in US and global commerce. And, as always, the markets are always looking ahead and trying to gain some clarity in what is to come. As important as earnings will be the forward-looking guidance that corporations provide.  This will be telling.

I read so much lately about “market uncertainty”.  The last I checked, uncertainty always rules. If we KNEW what was going to happen, we could all be substantially. . .better off. But, in the absence of a crystal ball, we continue to attempt to manage downside risk on our quest for appreciation on the upside.  Overall, its been a pretty good run at doing so.

Repeating my usual words in mid summer, there is typically not much news in late Summer and early Fall. . .And in the absence of good or bad news, the markets tend to go dig up some bad.  We will see what unfolds ahead through the next couple of weeks of earnings announcements and then the quieter period of August and September.  For now, valuations in the markets remain elevated.  And headwinds exist for the markets to continue upward – in the form of tariff unknowns, geopolitical uncertainties, and ever-higher general expectations.

While trade uncertainty and tariff uncertainty abound, the markets are behaving as if this will have little to no effect.  It WILL have an effect.  The question will be to what degree. Raymond James and multiple firms have revised their GDP forecasts downward, although many remain constructively positive in looking ahead.  Despite the concerns, US growth is set to outpace its developed peers.

I’m comfortable with the long term, but more cautious about the short term. Tariffs seem to be being ignored by the markets.  From reports I read, personal consumption remains positive but is showing some fatigue.  Labor markets have cooled somewhat.  Monthly retail sales have moderated. Inflation is not a major concern, but a concern nevertheless. The hot real estate market has slowed.  If tariffs abound, higher prices for consumers will inevitably follow.

There IS a happy bullseye – where growth slows enough for a FED rate cut or two and then consumption and spending carry on their merry way.  But it will be somewhat challenging to nail this bullseye.  The market continues to behave as if it will happen.  We will see together. . .

I wish you well as the remainder of Summer unfolds.  There are LOTS of things going on in the lives of our clients these days.  Renee and I look forward to helping and greatly value being along for the ride.

Very best regards,

Key

Side note: I hear concerns from all directions – media and friends – about Social Security. I’m not concerned.  I understand right now there are NINE bills in Congress that pertain to Retirement income/Social Security.  Rest assured it might change in some form and it might be at the 11^th hour, but it is not going away nor getting substantially removed from our futures.  It will be here. (Key’s opinion, of course)