"Market Performance: Q2 Recap"

"What’s Next for Q3?"

Back on January 11th of this year we reported on the Animal Spirits that lifted the markets through last summer and into the 4th quarter of 2024. In the context of the stock market, "Animal Spirits" refers to the psychological and emotional factors that influence investor behavior, often leading to irrational or non-rational decisions. These factors, such as confidence, fear, and herd mentality, can drive market movements that are not solely based on fundamental analysis or economic data.

Now it’s time to question the resiliency of our upcoming 3rd quarter of 2025.

I am not certain I have all the answers but will wade into the deep water on your behalf.

1. The second quarter is going to end today (June 30th) with a roaring good finish. Talk of the Standard and Poor’s (S & P) getting to 7,000 by the end of this year is appearing possible. The new record hit Friday was 6,180 that is a 10% gain for the quarter. To put that is perspective the S&P was up 24% for all of 2024. Should the S&P add another 10% gain for the next two quarters it will hit 8,200 (not at all likely but a fun thought - tee hee!)

2. Our near-term future feels that the right elements will present themselves for the Fed to cut rates in late summer or autumn. Stocks love rate cuts, even if already priced into the shares ahead of the event.

3. The market has recently broadened out to include much more than just tech stocks and industrials, with services up 11%, consumer discretionary 7%. Even basic materials hit a 5% increase.

4. Tariff deadline for deals originally set for July 9th are already being said to be flexible and likely extended. That is like a deep exhale for the market’s lungs.

5. China and America got their trade deal (virtually) done. Other trade deals will be coming as the administration has few other distractions now that war and budget legislation are apparently ending.

6. The Senate voted on the (BBB) Big Beautiful Bill on Saturday and so it goes to the House with a slim chance that it arrives on Trumps desk July 4th. Just it being done in the next two weeks will give a nudge to the markets.

7. That BBB has some real incentive for the markets with tax cuts extended and new ones created. Will the no taxes for overtime or tips get that sector of our workforce to invest a portion of their windfall into investments like precious metals, crypto, or even stocks? This bill will more than likely add $3 trillion to the national debt, and that is a huge issue, but that is another article, for another day.

8. Technology sector added 21% for the second quarter, and industrials 12%, wow!

9. The bigger banks, (21 of them) all passed their stress tests last week, so they are likely to make some sizeable share buybacks and possibly some dividend increases as well. With rates remaining high, lenders are in a stable position. Wells Fargo (WFC) hit an all-time high on Friday at $81 per share. With their asset cap lifted in June, they will have more they can do to earn (NII) Net Interest Income and lending. I would not be at all surprised if it reaches $90 before November. Citi (C) Bank share price has room to run, even further than its new high, partly due to its finalization of the MasterCard acquisition.

10. Believe it or not it’s essentially July and that means the quarterly earnings reporting will begin. The two sectors going first on July 10th airlines and July 16th the big financials / banks. Overall, I am expecting some fairly strong earnings results (for the most part), much like what we experienced from the first quarter. By mid-July through late August, I will be attending approximately 80 to 90 earnings calls. I will report on the ones that have the greatest impact on your portfolio or should be looked at for a potential add to your portfolio.

Did you notice we got all the way through 10 reasons to cheer the markets without mentioning AI?

What do we do with a market that has a mediocre economy but shrugs off so much uncertainty?

Well, we enjoy it for however long it wants to last.

This market does not fear War, POTUS rants about the Fed chair, ICE creating alligator Alcatraz in Florida, or breaking off Tariff Talks with Canada (which are back on as of this morning). The list is longer, but you get the picture. How can it be that the volatility (VIX) Index remains largely unchanged at around 17 points since June 19th?

Next week, we will seek out the elements trying to tear down the markets surge. For now, let’s see if any Animal Spirits are going to move the markets further forward.

Results are not typical. I teach methods that have made other traders’ money, but that does not guarantee you will make any money. Success in trading requires work and dedication. Past performance does not indicate future results. All trading carries risks.