Each weekday morning – at 7:30am ET – Strategas holds its morning meeting.  The entire research group, the Firm’s sales team and traders gather – very often joined by clients passing through town (and who don’t mind an early start to their day) – and between research presentations, notes from the road, and often lively debate, we get an informed start to our day.  (Clients who do not join us can watch the taped version of each Monday’s session on our research portal.)  As much as anything, I find the “tone” of the meeting and the trend in tone over recent meetings to be a good barometer of sentiment – in the room but also and importantly of the mood among clients.  As we move into late summer it is tough to characterize investors’ sentiment as anything other than roundly optimistic.  Moreover, this sense of optimism (and relief) appears to be broadening.  After navigating the early-2Q post “Liberation Day” washout – without suffering a financial event, and then finding definition on the extension (and expansion) of the Tax Cuts and Jobs Act (TCJA) and clarity on the direction of trade policy – particularly the upper bound on non-China tariffs – as 2Q drew to a close it is not surprising that the U.S. market has broken to back to all-time highs.  Add on on confirmation from generally strong quarterly corporate earnings result, growing anticipation of lower policy rates and the market’s ability to cut through the president’s schizophrenic policy musings as quickly as they’re tweeted and we agree, it’s tough to fade* stocks. 

For a more measured approach we turn to our monthly Market Balance Sheet exercise, in which we assess 16 foundational market indicators as either an “Asset” or “Liability” to guide our outlook on the economy and markets with dispassion and discipline.  Unchanged from June, our weighted measure registered a +6 for July (published 7/28).  Not as stretched as we saw before the Financial Crisis and the Covid pandemic but at a level we would characterize as “safe.”  Let’s be on the watch equally for developments that could manifest either a blowoff top or the fraying of currently strong, fundamental underpinnings.  These are the periods investors are most susceptible to analytical laziness and poor decision making.

Strategas Securities, data through 8/2/2025

What to watch?  As we have noted on these pages many times the first place we look for confirmation of strength (or pockets of concern) are earnings and interest rates – the building blocks of risk asset prices.  On the surface, there appears little to be concerned about in the moment.  U.S. corporate profits appear to have shouldered through any uncertainty in 2Q and are on track to post +8% Y/Y growth for the quarter; accompanying the solid 2Q results has been guidance confirming a similar growth for the balance of the year.  We continue to focus on the pace of revenue growth (are businesses and consumers still spending?) and the direction of operating margins (are inflationary pressures digestible?)  On the other side, interest rates remain largely rangebound and credit spreads only modestly off their tights**.  The Treasury Dept’s quarterly refunding announcement did not include the most bullish, i.e., curve flattening, buyback announcement some anticipated so the klieg lights on the Fed’s September meeting will intensify.  The Bureau of Labor Statistics (BLS) non-farm payroll report for discrete July was “OK” (+73k) but a large (-258k) downward revision to prior months and notable weakness in cyclical sectors wrote the report headline.  Tough for Chairman Powell to argue the Fed is not behind the curve; the futures’ market odds of a policy rate cut in September gapped higher (exceeding 80%) on the release.  Animal spirits are stirring. 

Two other gauges are also drawing attention.  The Dollar and Inflation.  As Strategas’ chief market strategist Chris Verrone and ETF strategist Todd Sohn have noted, the Dollar rally looks to have legs over the short-to-intermediate term as the shorts had become too crowded.  At the same time, Gold broke below its 50-day moving average last week.  Historical analogues would support the continuation of these trends (bullish USD/bearish Gold) but the rise of global fiscal deficits, broad currency debasement and the unabating momentum of the De-Globalization trade – an important theme in our Macro Thematic Opportunities Portfolio – suggest rangebound volatility in both fiat and hard assets may reverse in the months ahead.  The longer-term outlook for both will also hinge on the outlook for Inflation.  While prices remain “sticky,” inflation expectations remain generally anchored.  Strategas chief economist Don Rissmiller believes that any (eventual) inflation pop due to tariffs should be “transitory” with monetary policy currently restrictive.  A dramatic easing of conditions could alter this view. Where policy is people, the quiet of August will be consumed by the president’s upcoming appointment to fill the upcoming board vacancy created by Governor Kugler’s early resignation (her term ran through Jan’26).  Will Chair Powell’s successor be installed across the table from him for the last months of his term?  Never a dull moment.

As we wrote in June, we continue to see thematic growth opportunities in “Artificial Intelligence” and the adjacent (though decidedly broader) “Industrial Power Renaissance.”  In our Macro Thematic Opportunities portfolio, we have maintained ballast with quality-driven “Cash Flow Aristocrats” and have been inclined toward exposure to the structural questions posed by “De-Globalization.” On balance, equity markets have the support to move higher from current record levels.  Elevated multiples and interest rate uncertainty could introduce a bout of volatility before the positive impacts of tax cuts and deregulation shore-up the foundation bulls hope will carry the market into 2026.  We’re along for the ride but prefer target thematic allocations over all-in, flows contingent positioning.  August is a time for family, rest and reflection but… avoid the lazy approach.

Nicholas Bohnsack