No. of Recommendations: 9
A low-load SPX index fund has been shown to outperform stock-picking over time. The SPX index fund reflects the volatility of the market as a whole while continually replacing lower-performing companies with higher-performing companies. The data is generally based on a cap-weighted SPX index fund, not an equally-weighted index fund. This article shows the benefit of an index fund vs. stock picking.
https://humbledollar.com/2025/07/going-to-extremes...In the current market, when stocks as well as other assets (real estate, cryptocurrencies) are clearly in bubbles, some investors are seeking overlooked value stocks.
https://www.wsj.com/finance/stocks/investing-value...
Investors Are Flocking to the Stock Market’s Discount Rack
Pricey tech heavyweights send some individuals in search of bargains
By Hannah Erin Lang, The Wall Street Journal, July 27, 2025
Wall Street’s bargain-hunters are back. ...
Sky-high valuations on the market’s tech heavyweights have left investors in search of less-expensive alternatives. What’s more, the Trump administration’s trade policies haven’t affected all companies the same way, creating winners (and losers) for research-driven investors to discover....
Some analysts warn that the recent wave of optimism stands at odds with a number of unresolved risks on the horizon in the latter half of 2025: The specifics of tariff policy aren’t yet finalized, and the Trump administration’s self-imposed Aug. 1 deadline for striking deals looms. There are also early signs that U.S. policies are lifting the inflation rate, which could prevent the Federal Reserve from making much-anticipated interest-rate cuts later this year.... [end quote]
Next week is the August 1 deadline for imposing President Trump's tariffs. As of August 1, 2025, countries that have not secured a new trade deal with the United States face significant tariff increases. While there was an initial "10% baseline tariff" applied to most countries since April 2025, the August 1 deadline marks the implementation of substantially higher, country-specific reciprocal tariffs.
The rates vary significantly by country, but they are often much higher than the previous 10% baseline. For instance, the European Union faces the threat of 30% tariffs, Mexico and South Africa 30%, Brazil 50%, and Canada could face 35% on some imports. China, which has a separate set of ongoing negotiations, is facing 55% with additional tariffs.
Beyond the general country-specific rates, certain industries also face elevated tariffs. For example:
Steel and Aluminum: A 50% tariff is in effect for most countries (with the UK as an exception at 25%).
Automobiles and Auto Parts: A 25% tariff is active.
Copper: A 50% tariff will be effective from August 1, 2025. This high tariff on copper is cutting off our nose to spite our face since copper is used in many critical applications and it will take years to develop new U.S. sources of copper.
Japan negotiated a separate tariff treaty last week. The most significant aspect is the agreement for the US to impose a 15% tariff on Japanese imports, including cars. Japan has committed to investing $550 billion into the United States economy but it's not clear where exactly the money would be invested or how the profits would be allocated.
All tariffs are harmful since they act like a tax on consumers and importers (if the importer absorbs some of the hit). The result will be lower international trade (which will harm multinational corporations) and increased consumer price inflation.
Everybody knows this so the markets don't expect the Federal Reserve to cut the fed funds rate in August. About 2/3 expect a 0.25% fed funds rate cut in September but the markets often front-run the Fed. Unemployment has been low and stable at about 4% since January 2022. The inflation rate is forecast to be higher in 3Q2025 and well above the Fed's target of 2%. The Atlanta Fed's GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2025 was 2.4 percent on July 25. This is a respectable, sustainable growth rate if it continues.
The U.S. GDP growth in the first quarter of 2025 was a decrease at an annual rate of 0.5 percent. This was the third and final estimate released by the U.S. Bureau of Economic Analysis (BEA). It marked the first quarterly contraction in three years. The decline was primarily attributed to an increase in imports and a decrease in government spending, partially offset by increases in investment and consumer spending.
If there are signs of contraction in the second quarter the Fed might actually cut the fed funds rate. But a lower fed funds rate won't necessarily lower the longer-term yields if bond investors think that inflation will increase. In fact, the Treasury yield curve is the steepest it has been for years -- since the Fed started raising the fed funds rate in 2022.
The Chicago Fed’s National Financial Conditions Index (NFCI), which provides a comprehensive weekly update on U.S. financial conditions in money markets, debt and equity markets, and the traditional and “shadow” banking systems, is very loose and getting looser. This is providing the wave of borrowed money that is supporting the bubble valuations of the stock and crypto currency markets. Debit Balances in Customers' Securities Margin Accounts in June 2025 was $1 Trillion, a record. Margin account values correlate with stock market values.
Small businesses are borrowing money to speculate in crypto currencies.
https://www.shrewdm.com/MB?pid=900795629Remember that margin is borrowed money. If (when) the bubble bursts it will all vanish into thin air... like so many previous bubbles. (cf. "Manias, Panics and Crashes.")
The stock indexes and bitcoin are at record highs. (IBIT is the largest bitcoin ETF.) The trade is strongly risk-on as stock and junk bond prices are rising faster than the 10 year Treasury. The Fear & Greed Index is in Greed.
The USD has lost 15% of its value since the beginning of 2025. Gold is stable but copper, silver and oil are rising.
The bubbles continue to inflate. The Price to earnings ratio based on average inflation-adjusted earnings from the previous 10 years, known as the Cyclically Adjusted P/E Ratio (CAPE Ratio) is 39, compared with a historic median of 16. (It was 32 in July 1929.) The Case-Shiller U.S. National Home Price Index is 330 compared with 184 in July 2006 (the height of the previous housing bubble).
The METAR for next week is cloudy. Based on trend-following and TACO the market may continue to party. But if high tariffs actually are imposed on August 1 the markets may suddenly wake up to the danger of a high-tariff regime and become volatile. It's hard to say exactly what will pop the bubble.
Wendy
https://www.cmegroup.com/markets/interest-rates/cm...https://fred.stlouisfed.org/series/UNRATE/https://www.clevelandfed.org/indicators-and-data/i...https://www.atlantafed.org/cqer/research/gdpnowhttps://stockcharts.com/freecharts/yieldcurve.phphttps://fred.stlouisfed.org/series/FEDFUNDShttps://www.chicagofed.org/research/data/nfci/curr...https://www.finra.org/rules-guidance/key-topics/ma...https://stockcharts.com/freecharts/candleglance.ht...https://stockcharts.com/freecharts/candleglance.ht...https://stockcharts.com/freecharts/candleglance.ht...https://www.cnn.com/markets/fear-and-greedhttps://www.multpl.com/shiller-pehttps://fred.stlouisfed.org/series/CSUSHPINSA 