Outlook

After a secular rise in equity prices in 2023 and 2024, extended valuations and high concentration laid the groundwork for factors to stabilize market excesses. In the context of risk efficiency, the factor-driven narrative becomes even more compelling.

Despite rising geopolitical risks, tariff threats, and shifting rate expectations, global markets remain resilient—buoyed by strong fundamentals, easing inflation, and tactical policy pivots across major economies.

This week brings numerous critical events, including key economic reports, significant Treasury auctions, major central bank decisions, high-profile earnings, and a court case reviewing presidential tariffs.

Two themes developed with fresh economic data released last week. First, June inflation data painted a mixed picture. The second theme revolved around consumers, who continued to be a source of strength for the economy.

Governor Christopher Waller’s reminder this morning that he’d prefer a rate cut this month coincides with the White House looking for Fed Chair Powell’s replacement. And investors are taking it well.

On top of all the geopolitical headlines the money and bond markets have had to contend with of late, there has been another news story that has recently garnered its own fair share of headlines: a new Fed chair.

Amid the noise, August presents a tactical opportunity—if fiscal hurdles clear. With yields shifting, investors may eye short-term moves with cautious optimism.

It’s not often that you get a clean sweep of bullishness across the board. But when all of these indicators rise simultaneously, it typically isn’t associated with rising stock prices; one would expect stocks to decline.

Trade developments and continued momentum pushed all three major averages to modest gains again for a shortened holiday trading week. So while there is good news overall, uncertainty still lingers beneath the employment surface.

Investors are far less freaked out about tariffs than they were just three months ago, but they remain a sore subject. At the same time, most of us either know or have participated in, the roller-coaster ride of Tesla (TSLA) shares over the past several months.

Economically, the major implication is in the energy markets. Lower energy prices are a good thing for many countries and for the global economy. The utility industry needs power generation capabilities after all.

Once again, the decision to keep Fed Funds at its current level came as little surprise, as the Fed continues to be sitting back and waiting to see how the economic and inflation landscape unfolds given the uncertainties that have arisen from tariff-related developments.