Resources/Weekly Insights

Volume 14, Edition 22 | July 21 - July 27, 2025

Staying the Course After a Market Rally

Doug Walters, CFA

Markets rally as fear of missing out (FOMO) takes hold. At some point it is natural for FOMO to be replaced by a fear of loss. But predicting turning points is a dangerous hobby amongst investors.

Contributed by Doug Walters, David Lemire, Max Berkovich, Matthew Johnson

After a strong run in US large-cap equities, we’ve heard a few understandable concerns: Are we due for a decline? Should we make a move before things turn?

It’s a natural reaction. But history—and data—tell us that trying to time the market based on gut feeling or recent gains is rarely a winning strategy. Even the most seasoned experts get it wrong. Former Fed Chair Alan Greenspan famously warned of “irrational exuberance” in 1996. The dot-com bubble didn’t burst until 2000.

Market corrections do happen, but their timing is notoriously unpredictable. Reacting too quickly—especially by reducing equity exposure after a rally—can mean missing further gains. Research consistently shows that missing just a few of the best days in the market can meaningfully reduce long-term returns.

That said, de-risking isn’t always a bad idea. If recent gains have moved you into a position where you now can afford to take less risk—and doing so would provide real peace of mind—that can be a smart, permanent shift. But making changes out of fear, based on a belief that the market is “due” to fall, is something else entirely. That kind of reaction often leads to costly decisions.

That’s why our investment approach isn’t built on prediction. It’s built on preparation.

We construct well-diversified portfolios designed for a range of outcomes, not just one. While US large-cap stocks have had an impressive run, they’re not the only asset. Small caps have notably underperformed large-cap and research shows that can be an opportunity¹. International equities have been strong this year, but still present value, especially relative to the US market. Gold remains attractive as a hedge, even after its recent strength. And fixed income, with positive real yields, once again, offers diversification in a way it hasn’t in years.

While opportunities in the diversified portfolio exist, headlines and recent performance can still tempt investors to abandon a sound plan. One of our key roles is to help clients stay grounded—using evidence, not emotion, to guide decisions.

That brings us to our latest podcast episode, where we take a look back at the evolution of investment research. From printed data sets to spreadsheets and AI, the tools have changed. But the goal remains: identify meaningful signals and make informed decisions. In times of uncertainty, that reliance on data—not hunches—is what can help keep emotions in check.

So, if you’re feeling uneasy after a market rally, take comfort. We’re watching the data and your portfolio. Pullbacks will happen, but a well-diversified portfolio is built to function through the highs, the lows, and everything in between.

1. Distillate Capital, “Big Trends Favor Small Stocks,” June 2025.

4.33%

Effective Federal Funds Rate

The Fed has another rate decision to make this week. The current range of 4.25%-4.50% is not expected to be cut, but we still expect all eyes will be on the announcement.

Headline of the Week

Divergent, Uncertain, and on Hold

This week, both the Federal Reserve (Fed) and the European Central Bank (ECB) find themselves in the same spot—on hold. The central banks face differing economic backdrops, but both markets continue to price in further rate cuts. In the US, despite some near-term signs of strength, concerns remain about tariffs’ disruptive impact. While Q1 GDP contracted slightly, Q2 is shaping up to be much better. However, there are some quality concerns with Q2, as many firms pulled trade forward to get ahead of further tariffs. The Fed appears content to hold steady after last year’s modest easing, with inflation still hovering above target and labor markets showing mixed signals. Europe’s economy, though still fragile, is showing resilience thanks to fiscal support and improving inflation dynamics. The ECB, having already cut rates eight times, opted to pause this week, citing a “good place” economically and the potential for a US-EU tariff deal.

For now, both central banks are united in their caution, waiting for some sense of clarity on trade and inflation before making their next move.

The Week Ahead

I struggled to write this edition of Week Ahead. There’s a whole lot of nothing going on next week—just a small matter of several US employment numbers, GDP, a Fed rate decision, PCE, and Manufacturing PMI. Not to mention a slew of inflation, GDP, and interest rate decisions from around the globe, including Australia, Canada, China, the European Union, and Japan.

And let’s not forget the “quiet” earnings week: Microsoft, Meta, Apple, and Amazon all report. Oh, and next Friday is August 1st—you know, Trump’s tariff deadline.

If you couldn’t tell already, I’m being facetious. Let’s get into it.

Rate Decision (Wednesday)

The consensus is for the Federal Reserve to remain on hold, despite persistent pressure from the White House to cut interest rates. Some Fed Governors, like Waller and Bowman, have begun to vocalize their desire for a rate cut, citing the weakening labor market. It remains to be seen how their dissent will influence the final decision.

Tariff Deadline (Friday)

August 1st is the deadline for countries to sign “reciprocal” trade deals or face steep tariffs. Several agreements have already been reached with key trading partners, including the UK, Japan, Indonesia, the Philippines, and Vietnam.

A preliminary deal has been struck with China, but negotiations will continue into next week. A finalized deal must be in place by August 12th; otherwise, the temporary truce will expire, and we could see the return of triple-digit tariff rates. The EU has yet to reach a deal, though EU trade representatives remain optimistic one can be reached.

Snapshot: Economic Calendar

US GDP (Wed) – Expected: 2.5%, Prior: -0.5%
US PCE (Thu) – Expected: 0.3%, Prior: 0.2%
Bank of Japan Rate Decision (Thu) – Expected: Hold
Chinese Manufacturing PMI (Thu)
US Jobs Report (Fri)
- Unemployment – Expected: 4.2%, Prior: 4.1%
- Nonfram Payrolls – Expected: +102k, Prior: +147k
US Manufacturing PMI (Fri) – Expected: 49.6, Prior: 49.0

Snapshot: Peak Earnings Week

Microsoft (Wed)
- Microsoft hasn’t missed earnings expectations in two years.
- Expect commentary on cybersecurity following the SharePoint breach.
- Investors will be watching for updates on AI monetization.
Meta (Wed)
- Will Meta’s AI spending catch markets off guard?
- CEO Mark Zuckerberg’s $14B hiring spree—including Scale AI’s CEO—has raised eyebrows.
- Investors are eager to see whether this aggressive AI push is translating into revenue or just inflating costs.
Apple (Thu)
- Apple faces steep Tariff headwinds.
- Investors are also concerned about Apple’s lack of an AI strategy.
Amazon (Thu)
- AWS is expected to drive revenue growth yet again.
- The focus will be on cloud margins, consumer demand trends, and how Amazon is navigating global tariffs.

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