Navigating New Highs

The Week Ahead - August 18, 2025

Investors are supremely confident that earnings will continue to grow, the economy is essentially recession proof, and that the Fed will cut short-term rates multiple times starting in September until it reaches a neutral rate in a range of 3-3.5%. This is why the S&P 500 rose for a second week in a row to another new all-time high. The one positive I saw last week, which I am always looking for, is that participation continued to improve. More sectors and stocks are joining the rally in addition to technology and beyond the AI theme. That is critical if this bull market is to continue, which I think it will, and it signifies that investors are increasingly confident in the sustainability of the economic expansion.

Yet I have to continue considering the negatives or headwinds, as the market achieves one new high after another. In my view, the most important principle of successful investing is to do so based not on what we think should happen, or what we want to happen, but on what is most likely to happen. To do so, we have to free ourselves from all forms of bias, remain flexible in our outlooks based on incoming data, and balance the headwinds and tailwinds that always exist in any economic and market environment. That has been difficult to do this year, because when I have pointed out any negative rates of change or concerns I have about the economy or markets, I have been criticized for being political. That is frustrating, because the basis for the criticism is what is political, but I will stay true to my discipline.