Five for Friday
August 1, 2025
All-Time Highs, Valuations, Seasonality, "Good Enough", Tires
1. Highs
Last Friday, the S&P 500 hit an all-time high. That same day, the S&P 500 Equal Weight hit an all-time high, as did the Technology, Financials, and Industrials sectors. One day earlier, the MSCI All Country World ex-U.S. index also hit (you guessed it) a new high. We’ve covered how new highs are a bullish signpost, but it’s worth adding the context about the broad participation of the recent rally if only to say this: it’s not just U.S. Big Tech. Broader rallies are healthier rallies, and while the A.I. boom has investors yet again worrying about market concentration, this rally is more robust than meets the eye.
2. Valuation
Another common complaint about today’s market is that due to the bull market of the last three years, stocks are expensive relative to history. On some levels, that’s true: there are few ways to slice and dice this market to make its valuation appear “cheap.” But comparing the S&P 500’s valuation today (often measured by a metric like price-to-earnings ratio) to some past level requires context that is rarely provided—namely, the index has different companies than it used to! That seems simple, but comparing the valuation of today’s Big Tech, Growth-heavy S&P 500 to the 2005 S&P (heavy on Financials) or the 1990 S&P (heavy on Energy and Industrials) is apples to oranges. There’s a good argument that today’s higher-growth stock mix deserves a higher valuation than past iterations of the same index (consider that the S&P’s profit margin has more than doubled since the 1990s). How much higher a valuation it deserves is a fair question, but index make-up is key to any bearish valuation argument.
3. Seasons
While seasonality (how stocks perform in different parts of the year) is far from the end all be all, it can be useful for market analysis. And with today being Aug. 1, it’s worth noting that August-September has been the worst 2-month stretch for the S&P 500 since 1950. Still, context is important. Our partners at Strategas write: “Historically, ending July with a strong underlying trend has resulted in a modest chop over the next two months, not outright weakness. The weakest Aug-Sep periods have typically been with a downtrend already entrenched.” That’s clearly not the case today, with stocks up 15% over the last 3 months.
4. Gray
In today’s world of media and social media hyper-sensationalism, it seems things can only be dreadful or incredible. The reality, however, is far more often in the mushy, gray middle. And that’s exactly where the U.S. economy sits today. Call it the “good enough” economy. GDP bounced back in Q2…but consumer spending and business investment dipped. Firing is historically low…but hiring has cooled. Interest rates are higher than they were in the 2010s…but lower than they were in the 1980s and ‘90s. Inflation has come down meaningfully…but is still above the Fed’s 2% target. Tariffs weigh on business investment…but tax cuts juice business investment. Not a boom, not a recession. It doesn’t make for a good headline, but it is good enough for two critical things: stock market gains (see point #1) and profit growth.
5. Did you know
that 125 years ago this month, the first edition of the Michelin Guide was published? The guide, now famous for its star rating system (there are 157 three-star restaurants globally), got its start as a directory for things like maps, hotels, and gas stations. It was designed by the tire company (yes, the same Michelin) as a ploy to get people driving and increase demand for cars—and thereby, for tires. Funny how things evolve with time.
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This is not a complete analysis of every material fact regarding any company, industry or security. The opinions expressed here reflect our judgment at this date and are subject to change. The information has been obtained from sources we consider to be reliable, but we cannot guarantee the accuracy. Market and economic statistics, unless otherwise cited, are from data provider FactSet.
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