This week was marked by risk-off sentiment as equities declined, led by weakness in mega-cap stocks and the Nasdaq, though small caps fell in line with the S&P 500 and equal-weight and defensive sectors outperformed. International equities held up better, Treasury yields rose with high-yield bonds outperforming investment grade, commodities were steady, the dollar strengthened modestly, and volatility increased across asset classes. Notably, Fed Chair Powell’s Jackson Hole speech struck a dovish tone, highlighting labor market risks and signaling openness to rate cuts as soon as September, sparking a sharp rebound in equities and renewed optimism in rate-sensitive sectors.

This week, the markets rallied on renewed risk-on sentiment. The S&P 500 reached a new record, but small caps led after a cool CPI print raised expectations for a September rate cut. International stocks also traded higher, with developed markets performing in line with the S&P 500 and emerging markets underperforming. Treasury yields rose across the yield curve, weighing on long-duration Treasury bonds. Corporate credit spreads edged lower, and high yield slightly outperformed investment grade. Oil and the US dollar changed slightly, while gold was traded lower.

This month’s chart shows how different withdrawal rates can impact a retirement portfolio’s lifespan. It assumes an individual retired in 2000 at age 65 with $500,000 and started taking monthly withdrawals. Each line reflects a different withdrawal rate between 4% and 8%, showing how the portfolio fared through age 85. While all scenarios start at the same point, the paths quickly diverge, especially during periods of market volatility. The chart illustrates how a retiree’s withdrawal strategy can determine whether the portfolio lasts or runs out.

This week, mega-cap stocks led with the Growth factor, and the Nasdaq index outperformed the S&P 500, while the Equal Weight S&P 500 underperformed. International equities outperformed U.S. equities, with developed and emerging markets outperforming the S&P 500 by nearly +2% as the U.S. dollar weakened. Bonds traded higher as Treasury yields rallied after a weak July jobs report, with the front end of the curve falling the most. Volatility expectations rose, with the VIX rising to mid-June levels before retreating.

Stocks climbed to new highs in July, with the S&P 500 and Nasdaq both logging six consecutive record closes late in the month. Investor sentiment improved after better-than-expected Q2 earnings and trade agreements with Japan and the EU, with tariff rates on the deals less severe than feared. However, by month-end, market leadership was top-heavy again, with the Magnificent 7 gaining over +5% after leading AI firms reported strong Q2 earnings. Volatility remained subdued for most of July.

This week, markets advanced with the S&P 500 rising 1%, outperforming the Russell 2000. Defensive sectors—including Utilities, Health Care, and Real Estate—led gains, while Technology remained flat. International equities surpassed U.S. counterparts, with developed markets outperforming emerging ones. Treasury yields declined, especially across intermediate and long durations, and credit spreads tightened, allowing high yield to match investment-grade returns. he VIX dropped to its lowest level in 2025, signaling rising investor confidence driven by improved market breadth, strong earnings, and trade policy progress.

Lawmakers recently passed the One Big Beautiful Bill Act (OBBBA). The bill makes permanent individual rates from the 2017 tax cuts and extends key provisions related to business capital expenditures. What impact could the bill have? History shows that tax changes don’t always deliver consistent results, with outcomes dependent on the overall state of the economy. While some past tax cuts led to strong economic growth, others occurred during or immediately before an economic slowdown. The OBBBA may offer a modest, short-term boost to economic growth, but its long-term effect will depend on other factors, such as interest rates, business confidence, and consumer strength.

This week, the markets traded cautiously with the S&P 500 stuck in a narrow trading range since the start of July. The Nasdaq, tech sector, and growth factor outperformed, while value, low volatility, and equal weight traded lower. Small ended the week with a slight loss, underperforming the S&P 500. Overseas, emerging markets outperformed both developed markets and the S&P 500. Rising Treasury yields weighed on long-duration bonds in fixed income, with the 30-year yield climbing sharply. Gold was changed a little, oil traded higher, Bitcoin set a record high early in the week, and the US dollar strengthened.

Technology spending is growing at its fastest rate in decades, with a +14% year-over-year increase in Q1 2025—the highest since the late 1990s. This surge mirrors the dot-com era, when tech investment exceeded +15% YoY before sharply declining in the early 2000s. After a brief rebound in the mid-2000s, investment turned negative during the 2008 slowdown. Throughout the 2010s, growth averaged a modest +5.5% annually. Although the COVID pandemic temporarily stalled spending, tech investment has since reaccelerated to levels not seen since the 1990s.

This week, there was an underlying rotation in the market. The Russell 2000 and S&P 500 equal-weight outperformed the S&P 500, while the momentum factor traded lower. High Beta continued to outperform, benefiting from its semiconductor OW, while Low Volatility traded lower, signaling a preference for risk assets. Investment Grade and High Yield bonds underperformed in the corporate market as credit spreads widened. Oil posted a modest loss, and the dollar snapped its losing streak to finish stronger. Implied volatility eased, with the VIX and MOVE indices signaling a calmer market.

After a turbulent start to 2025, the stock market rebounded strongly in the second quarter, driven by easing policy tensions, limited economic impact from tariffs, and better-than-expected corporate earnings. While the first quarter was marked by investor caution amid uncertainty about economic growth and the future of artificial intelligence, sentiment shifted significantly in the second quarter, creating two sharply contrasting market environments. Despite the volatility, markets ended the first half of the year relatively flat compared to where they began, with the S&P 500 gaining 6.1% after recovering from a decline of over 15%. Similarly, long-term interest rates fluctuated but ultimately returned to their starting point near 4.80%. For casual observers, the overall picture may appear unchanged, but the underlying market dynamics have evolved meaningfully. This letter reviews those developments and offers a perspective on the outlook for the remainder of 2025.

This week, stocks ended slightly lower as markets contended with escalating geopolitical tensions in the Middle East. The S&P 500 declined by 1.1%, with the Russell 2000 and NASDAQ posting similar losses of 1.2% and 0.7%, respectively. Volatility also increased across both equity and bond markets. Overall, the market remains range-bound and directionless as investors await clearer signals regarding trade policy, economic growth, and the Federal Reserve’s next steps.