In this special episode of 7 Market Movers, Gary, Aya, and Doug team up to cover what’s happened in the markets over the past week. Jobless claims came in better than expected this week, second quarter GDP numbers were revised up to 3.8%, and while major indices fell on Thursday, small caps and emerging markets have performed well—indicating a broadening of the market as a whole. Watch to hear what the investment management team expects to see in the weeks and months ahead.

TRANSCRIPT:

Hi, everyone. Welcome to another edition of 7 Market Movers. We're back together again.

My name is Aya Yoshioka, and I'm joined by our Deputy CIO, Doug Huber, and our VP of Portfolio Consulting, Gary Quinzel.

So this week, we're going to talk about three things. We saw GDP numbers that were revised higher. We saw initial jobless claims, another weekly number that we get, and markets are, again, still near all-time highs. So with that, I'll turn it over to you, Doug.

Yeah. Sure. Maybe you can start with the jobless numbers. It was a bit of a surprise when they released a much better print than expected at 218,000, which was much lower than the market was anticipating, especially on the heels of the last several prints, were really soft.

And there was a lot of concern in the markets around just exactly what was going on in the labor market, so much so that it was really the narrative that was centered around the Fed making its first rate cut in over a year. I think what the market's now trying to digest is was that softness situational? There's been a lot of talk about it being more supply oriented as policies around immigration have had an effect on the denominator. And so we'll see is that a onetime hit that was situational with certain things that were happening in specific states.

That's the working assumption today given just how good the number came in. And so, potentially, that softness we saw is maybe not as, the longevity of it is in question. So, it'll play into what the Fed does from here for the remainder of the year, and it'll be interesting to see how the markets price potential future rate cuts, for the last quarter.

Absolutely. And I think on the back of that, we got second quarter GDP revisions, this morning, and that was better than expected as well. So, second quarter GDP numbers were revised higher to a growth rate of 3.8% versus the prior report of 3.3%.

So, really strong numbers for the overall economy and a great rebound from that first quarter drop that we saw in GDP. And, you know, a lot of this is on the back of a strong consumer. It may not always feel that the consumer is strong, but the consumer spending has continued sort of even despite some of the headlines that we've seen regarding tariffs, even some of the higher inflation numbers that we're seeing in the economy. So, GDP remains strong, and we'll see we'll continue to see that as we go into the second half of 2025.

And, you know, on the backdrop of better-than-expected GDP economic growth, one might think that the stock market would rally, but we're actually seeing a little bit of the opposite right now. And so, for those that have been paying attention, we've seen close to thirty new all-time highs so far this year, which is really an astonishing number. The market has been pricing in good news. The market's been pricing in expected future rate cuts.

And now that we've seen them, we're seeing some quarter end rebalancing. We're seeing the market starting to adjust to the fact that it is very highly valued. If you take a look at the forward price to earnings ratio of the S&P 500, it's close to 23x earnings. That's a really high level that's only been reached a few times in the past decade.

So, historically, equities are expensive, still attractive. Right? But the market is starting to rationalize and consolidate a little bit as it processes the fact that the good news of GDP, that's looking backwards. We have to look forward to thinking about what's going to happen next.

And we've talked a lot about, you know, labor market showing some signs of softening. We're not necessarily seeing a deterioration at this point, but the market does have to consolidate at some point. So, the good news, though, however, is we have seen some continued broadening in certain areas. We've seen small caps do a little bit better.

We've seen emerging markets do a little bit better. So for those that are invested in a broad, basket of equities, they're doing quite fine. And so a little bit of a pullback is quite normal. Any closing thoughts, team?

I was just going to mention the labor market data that we're going to expect next week. Next Friday, we'll get the nonfarm payrolls number. I know the labor market has been what the market has been paying most close attention to. We know it's where the Fed is paying attention. And so that that will be another big catalyst next week.

I'd add to that I think, you know, talking about that that higher valuation, I mean, that is the market telling us that there is this anticipation of higher future growth. Right? They're willing to pay more for it. We also know there's some index manipulation just given how top heavy the index is in higher PE multiple names. And so not all stocks are created equal to your point, Gary, that that a diversified portfolio has worked very well, this year, which is fantastic.

It will be interesting to see exactly, you know, where we go from here because there's some belief that maybe we are setting up for a bit of a Goldilocks period. There's others that we're going to be watching the data very closely to see exactly kind of what the economy's telling us, and what federal reserve policy might look like going forward.

And I think it's also worth pointing out that if we look at the fixed income landscape, we're seeing shorter ends in the short curve, but we haven't seen a spike on the long end, which is a positive thing. We call that a bullish steepener. So, there is reason for optimism. And so for those that are invested in bonds, you're seeing overall positive returns. So balanced portfolios continue to do well so far in 2025.

And with that, we hope you join us again next week for the next 7 Market Movers. Thanks again.

This information is not intended as a recommendation. The opinions are subject to change at any time and no forecasts can be guaranteed. Investment decisions should always be made based on an investor's specific circumstances. Investing involves risk, including possible loss of principal.