Last Week
It was a mixed bag for stock market investors. Strong performance in the Tech sector led to record highs in the S&P 500 and Nasdaq Composite, but underneath the surface, declining issues outnumbered advancing issues by a factor of 3-2, while equal-weighted S&P 500 (RSP) posted a modest decline. The news was generally good, outside of another volley of tariff threats, with strong retail sales, tame inflation, and solid earnings reports.
The rally in the Tech sector was in reaction to President Trump lifting the ban on Nvidia’s H20 chip sales to Chinese customers. The 5% gain in Nvidia’s shares, combined with nice moves in other AI stocks, led to a +1.5% move in the Nasdaq Composite and a 0.6% advance in the S&P 500. Russell 2000 eked out a +0.2% increase but remains significantly below the November 2024 high. The resilient economy, combined with the likelihood of interest rate cuts, sets the stage for an extended period of potential outperformance by small caps. As the graph below illustrates, history has shown us that when small caps reach this level of pessimism, it is time to allocate to the asset class. Like the character in Monty Python and the Holy Grail, small-cap companies are saying, “I’m not dead yet”. Please feel free to contact us if you are interested in receiving information about our small-cap strategies.
As for the tariffs, perhaps the 1971 Yes classic “Roundabout” should be the theme song. The song uses the imagery of a roundabout, a traffic circle that can confuse tourists, to symbolize the complexities of life. The next exit on the circle is now August 1, but we believe it is likely that we will be stuck in this roundabout for an extended period beyond that date.
Big banks kicked off the earnings season with better-than-expected results. Additionally, both JPM’s top boss, Jamie Dimon, and BAC’s chief executive, Brian Moynihan, used the word “resilient” to describe the U.S. economy and its consumers. Meanwhile, Netflix delivered earnings beat and raised guidance.
The bond market remained stable, with the yield on the 10-year Treasury unchanged at 4.43%. The Dollar and Gold both inched marginally higher, while Crude Oil prices weakened fractionally, leading to underperformance in equities in the Oil & Gas sector.
Nothing new on the Chicago Sports Scene. North Star Team members Eric and Brooke journeyed to Wintrust Arena to support the Sky in their losing effort against a very strong Minnesota Lynx squad.
This Week
Earnings season will be in full gear, with almost 100 companies reporting results for the second quarter.
The economic calendar is quiet, with no releases that are likely to move the markets.
Undoubtedly, we will remain stuck on the tariff roundabout.
The stocks mentioned above may be holdings in our mutual funds. For more information, please visit www.nsinvest.com.