• This week’s Market Alert focused on several major economic developments, including the Federal Reserve’s latest meeting, corporate earnings, inflation data, and GDP, all of which continue to shape the investment landscape.
• The Federal Reserve voted to hold interest rates steady, but an unusually high level of disagreement among voting members signals that policymakers remain divided on the path forward.
• While the Fed continues to emphasize controlling inflation over stimulating economic growth, future decisions will remain highly dependent on incoming economic data rather than predetermined policy guidance.
• Bond markets reacted differently than expected following the Fed announcement, highlighting ongoing uncertainty about inflation, long-term interest rates, and the direction of monetary policy.
• Looking ahead, the September, October, and December Federal Reserve meetings will be important milestones as markets continue evaluating how the new Fed leadership responds to changing economic conditions.
• Historically, new Federal Reserve leadership often faces periods of increased market volatility as investors test the central bank’s commitment to its stated policies.
• Earnings season continues to provide valuable insight into the health of the economy, with several major technology companies producing mixed results despite strong revenue growth.
• Unlike previous technology-driven market cycles, investors are becoming more selective, rewarding companies with healthy fundamentals while penalizing businesses with excessive spending or weakening cash flow.
• Many of the largest AI and technology companies have already experienced meaningful pullbacks this year, suggesting that valuations may be normalizing rather than continuing unchecked higher.
• Personal Consumption Expenditures (PCE), the Federal Reserve’s preferred inflation gauge, cooled this month. However, upcoming reports will be especially important as they begin reflecting the impact of renewed geopolitical tensions and higher energy prices.
• Although headline GDP appears to show a slowing economy, underlying consumer spending remains resilient, providing continued support for economic growth and corporate earnings.
• August and September have historically been more volatile months for the stock market, making it especially important to remain disciplined rather than reacting emotionally to short-term market movements.
• While uncertainty remains around inflation, interest rates, and global events, healthy consumer spending and corporate earnings continue to provide reasons for cautious optimism.
• At Retirement Planners of America, our focus remains on helping you make your money last as long as you do by navigating changing market conditions with a disciplined, long-term investment strategy designed to balance growth with protection

Transcript:

Hello, everybody! Thank you for joining us for this week’s weekly market alert video. It is Friday, July 31, and we are back in the saddle. I’m Jordan Roach, Chief Investment Officer of RPOA, and after a lot of travel, I’m back in the studio and happy to be with you. Now, what you’ll notice is I’m not wearing my tie today. Apparently, Ken’s put out a poll. Ask, do you like a tie? Do you like no tie? And so far, polls have not closed. So, this is what I’m going with. Though I thought about doing the nice T-shirt and shorts because some even say that’d be okay. So thought about pushing it today but ultimately settled on what’s comfortable. So again, we have a lot to get into this week, we’ve had Fed release, we’ve had major earnings from some big generals in the market, we’ve had inflation data, GDP. So, a lot to get into.

So, let’s get going. So, to start, let’s talk about what happened on Wednesday. Wednesday was the FOMC, the Federal Open Market Committee, met, and we actually had some dissent out there. Now ultimately, Fed Chair Wars said we are holding rates steady at that 3.5 to 3.75 percent number, but there was a dissent and a big dissent. Three voting members said they disagree and they would have favored a rate hike this meeting. Now, how rare is three members dissenting? Well, it’s extremely rare. If you go back to like 1950, that only happens in roughly 5% of meetings. So, there is certainly a let’s say brewing dissension within the committee of what we should do. Now, ultimately, again, they decided that we’re holding rates. And what did the market think about that?

 Well, actually, I think the market was fairly caught off guard, it was interesting leading up into this meeting. You saw odds of a Fed hike increasing and increasing, increasing, getting up to close to 40 percent. Where earlier in July, you know, again prior to kind of you know the Iran conflict continue continuing on, it had gotten very low, but then it grew and grew and grew to where the market almost was ready for the Fed worse to come in there and say we’re hiking, but he didn’t. We say we’re holding steady for now, and inflation’s the focus. And that has been kind of the normal tone he’s taken is that inflation is what he’s concerned about, growth less so. And I think in our view, that’s probably a good thing. Fed should be focused more on the inflation side than the growth side, and he is saying that that’s what’s going to happen.

Now, one thing that’s a big difference too with him versus Powell is his you know desire to give what’s called forward guidance to kind of give the market signal what he’s going to do over the next meetings because we have another meeting coming in September, then October, then December, and he’s basically saying, “I’m not giving you signals. Read data for yourself, interpret that as you will, and then we will decide if we’re on the same page. And that’s been interesting for the market to digest. And if you look at kind of what happened to Fed futures and Fed fund futures and what they expect, you see a mixed bag.

Basically, everybody the bond market hedging what the market could do, right? What the Fed’s going to do in those upcoming meetings, so it’s going to be very interesting to see if really does the market believe what the Fed is saying, and if you looked right after the Fed decision, which is about one or 2o’clock Central Time, you’d almost say the bond market doesn’t believe that Wash is so committed to taming inflation, like he’s saying, because what you did see is yes, that the two-year yield came down a little bit because again he didn’t hike when the market kind of expected him to. So, the two-year yield, which the bond market controls, came down. But if you look at the 10-year or the 30-year Treasury rates, those spiked. Those jumped to levels like on the 10-year that we really haven’t seen in the last five years, and on the 30-year to levels we haven’t seen since 2007.

Okay, so the market right now is either signaling forward weakness and basically asking for demanding a premium to take on long term debt, or taking rates up because maybe they don’t think the Fed’s going to hike or should have already hiked at this meeting. So again, a lot to watch over the coming months. The next major meetings to watch will be end of September, mid October, December, and of course we will report on those when we get there.

Now the next thing we want to talk about is are the markets over the next few months going to test wash? This is something that I think we have talked about in the last year. It is very common for the stock market and the bond market to test a new Fed president to see how they’re going to react to growth, maybe sliding, or to advancing really quickly. To see what inflation’s doing, and are their actions going to be led and met with, or are going to follow kind of what they’re saying? And if you look at the three or six months out from any new Fed chair, we see it’s very common to see big corrections on the stock market and the bond market, okay, and we haven’t really seen that. Maybe a little bit of volatility and pullback, but we haven’t seen that yet. And so it’ll be interesting to see as we move closer to that September time frame, when the Fed is going to have to give forward pass to give forward projections.

What’s called a dot plot is the market really going to test their resolve, okay, and see what they have and which. Side of the equation, growth versus inflation. Are they really committed to being trying to influence? So, it’ll be something interesting to watch. The other thing that we have had happen over the last couple days is some big generals, market leaders, right? These hyperscalers, Mag Seven. We’ve seen earnings, and we’ve seen kind of a mixed bag, right? We’ve seen a meta of the world, Facebook, that’s gotten killed, right? Down almost double digits from their release. Even though they beat revenue, the market’s slamming them for a number of reasons, including maybe bigger expenditures the market expected, dwindling cash flow, a number of things. So, the market is really punishing Facebook. Microsoft is benefit up double digits. Okay, and then we have Apple, we have Amazon. So what is interesting in this cycle, and this is maybe different than the feel kind of in the late ’90s when the AI cycle we talked about, or the dot-com lead-up that we talked about so much, is the market right now is being very discerning.

Okay, it is getting in front of and shooting down those companies that maybe are spending more than their cash flow that could that or than their cash flow, then then it can support. Okay, so that is going to be interesting to watch that dynamic, and I would say almost as healthy. Okay, the other thing to watch across all this is that you know throughout this year, if you look at again the dominant players and names over the last 10 years, certainly here over the last let’s call it 36 months. Talking about Nvidia, if you’re talking about AMD, Nvidia, Google, Amazon, all these players, all of them are very close to being in a bear market right now.

Okay, so they’ve got they pulled back greatly, and the market has rotated to other parts, and so maybe we’re at a point now where some of this AI bubble that has largely been in semiconductors and was in these Big Mac 7 names, maybe valuations are coming back a little bit. The market is being a little bit softer, and maybe that is what is needed to give us the next leg up. Okay, because not everything is flying like you think. Not everything is up triple digits. Again, some of these leaders are in a pullback, and with healthy earnings and healthy spending, maybe we still are in the part of the market where it can be led by revenue growth, earnings growth, healthy spending, and all these clouds of you know the war and what the Fed’s going to do. Maybe that’s not dominating the market yet. Maybe it still is an earnings market, and that’s a good thing.

So again, we’ll see what’s happening. Again, a lot of more earnings coming over the next week or so. The other big economic data points that we got were GDP and PCE, personal consumption expenditures, and that is actually what the Fed uses to judge inflation. Okay, and there’s a bunch of variance and derivatives of inflation rates, but PCE is the one the Fed uses, and that actually cooled. Okay, kind of in line with expectations, but month over month it came down. But in our view, that doesn’t really matter because that’s a backward looking and doesn’t really factor the re-escalation in Iran. And so, the next PCE read is going to come out in August, and that’s the one to watch. I think that’s the one the Fed’s going to be watching as well. Okay, GDP, GDP. If you just look at it, looks like it’s cooling, a cooling economy, but that’s because of how GDP is calculated.

If you actually look at the spending and consumption side, we’re actually seeing a fairly resilient consumer, and that’s good news. Okay, so not everything is great, but again, we see some resiliency in the consumer, and maybe that supports again a continuation of the trend, a continued you know growth in the broader economy and market doesn’t mean it’s reaccelerating. Doesn’t mean it’s the best it’s ever been, but again, it also probably means that we have more room to run, and so that’s interesting to see. So again, a lot to consume this week, a lot to digest, a lot of things that really don’t matter right now. But I think August and September are going to be very, very interesting to watch.

We’re going to get closer to readings. We’re really going to see if this war is having, you know, carryover effects in inflation and consumption and interest rates. And we’re moving into historically a very seasonally weak time, which is August and September. We’re just the market. Even absent all this, it’s just August and September give the market trouble, and so maybe all these things give it more trouble. But I would say that’s something to be interesting to watch. So, we’ll be on it for you. Again, thanks for watching. Please like and subscribe, and we will talk to you again real soon.

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