First, we would like to wish you and your family a wonderful 4th of July weekend -one filled with celebration, good food, and great company!
As we head into the second half of the year, stocks and bonds continue to effectively navigate a complex policy landscape shaped by evolving trade dynamics, geopolitical tensions, and fiscal stimulus. The market’s resilience in the face of these crosscurrents has been impressive, proving yet again that the fundamentals of the U.S. economy and corporate America remain strong and remarkably adaptable.
In a volatile first half of the year, the S&P 500 completed an impressive recovery from the April lows to end June at a fresh record high. The round trip from the February 19 high to the April 2 low and back, in slightly over four months, was one of the fastest recoveries on record from a 10–20% correction.
We are quite pleased with our tactical equity purchases made during the April lows, and history tells us stocks tend to go higher after recovering correction losses, with average gains of 9.6% and 16.2% in the subsequent six and 12 months.
Several factors helped fuel this rally:
- Israel-Iran cease-fire and resulting lower oil prices and lower interest rates
- Progress on trade deals and, so far, little evidence of tariff-driven inflation
- Stimulus from the tax cuts and spending bill
- Firming expectations of Federal Reserve (Fed) rate cuts and related weakness in the U.S. dollar
- Resurgence in demand for artificial intelligence (AI) investments
- Buying by under-invested institutions trying to keep up with the rally
While history suggests achieving new highs may bode well for the rest of the year, we know stocks don’t go up in a straight line. Several obstacles lie ahead. Perhaps the biggest one is the yet to be felt effects of tariffs on companies’ profit margins. With stock valuations elevated (as they’ve been for a while), earnings will be key to further upside. Potentially higher interest rates from additional deficit spending are another risk to monitor. And as always, geopolitics are a wild card.
We continue to monitor the macroeconomic backdrop, corporate fundamentals, policy developments, and technical indicators to guide our outlook. We believe the foundation for continued economic growth is intact, supported by resilient consumer spending, a healthy job market, modest earnings growth despite tariffs, the likely resumption of Fed rate cuts this fall, and the stimulus and tax cuts from the “big, beautiful bill” passed today by the House of Representatives.
As always, staying invested and looking for opportunities to potentially add to our equity positions on weakness remains the prudent approach for this market environment.
We wish you and your family a great Thursday evening, and a wonderful weekend!
Please reach out to us with any questions or comments you may have regarding your specific situation.
Jaran C. Day, Chief Investment Officer
Griffin Dalrymple, CFP®, Chief Strategy Officer
Past performance is not indicative of future performance.
The views expressed represent the opinion of Opinicus and are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and Opinicus’s view as of the time of these statements. Market performance cited is not indicative of portfolio performance experienced by portfolios Opinicus manages. Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties.