August 2025 Investylitics

Horizon Advisor Network Investment Committee August 4, 2025

The Horizon Advisor Network Investylitics Committee members met on the afternoon of Monday, August 4th, as markets were experiencing their first bout of volatility in more than two months. Over the last several weeks, we have seen continued trade and tariff uncertainty. However, there have been important deals reached with several of our important trading partners, such as Japan, South Korea, and the European Union. We also had a Federal Reserve Bank meeting, which concluded on Wednesday, July 30th, with no rate change for the fifth straight meeting. We also had an unexpectedly disappointing jobs report on Friday, August 1st, which added to market volatility. We were happy that all committee members were available to discuss their perspectives on the economic and political backdrop, as well as the outlooks from economists and market strategists we follow.

During July, the US stock market saw continued gains, with the S&P 500 and Nasdaq reaching record highs. Several factors, including strong company earnings, easing trade tensions, and a resilient macroeconomic backdrop, fueled this positive performance. There appears to be a tug-of-war between solid U.S. corporate earnings and the narrative that tariffs are hurting growth while lifting inflation. So far, second-quarter earnings results suggest that the strength of corporate America is winning, but questions remain about who will pay for tariffs. Early signs indicate a mix of consumers and companies. With corporate profit margins near all-time highs, it appears that companies have been able to absorb the tariffs without significantly damaging their profitability or raising prices. This is helping keep inflation numbers in check so far.

We are about two-thirds of the way through the second quarter earnings season, and the S&P 500 is reporting unexpectedly strong results.  On a year-over-year basis, the S&P 500 is reporting double-digit earnings growth for the third consecutive quarter. In addition, S&P 500 companies are reporting strong numbers for revenues relative to analyst expectations and year-ago results. According to FactSet, for Q2 2025 (with 66% of S&P 500 companies reporting actual results), 82% of S&P 500 companies have reported a positive EPS surprise, and 79% of S&P 500 companies have reported a positive revenue surprise. The blended (year-over-year) earnings growth rate for the S&P 500 is 10.3%. This is impressive considering that on June 30th, the estimated (year-over-year) earnings growth rate for the S&P 500 for Q2 2025 was 4.9%.

Source: FactSet

The Federal Reserve's Federal Open Market Committee (FOMC) decided to maintain the target range for the federal funds rate at 4.25% to 4.5% at its July 30th meeting. This marks the fifth consecutive meeting that the Fed has kept rates steady at this level. The markets widely anticipated this decision. However, the vote was not unanimous. Two Fed governors, Michelle Bowman and Christopher Waller, dissented, preferring a 0.25% rate cut instead. This was a rare occurrence, with multiple governors dissenting for the first time since 1993.

Chairman Jerome Powell indicated that the Fed believes the economy remains in a solid position but wants to further assess the impact of recent tariff policies on inflation and the labor market before making any policy changes.

Since early June, the markets had traded in a very orderly and tight range, not experiencing a rise or drop of more than 1% on any day over that time frame. All of that changed with the release of the July unemployment report on Friday, August 1st.  Not only was the July number of 73,000 jobs created (vs. 104,000 expected) weak, but the May and June numbers were revised downwards by a stunning 258,000 jobs. However, the unemployment rate rose only slightly to 4.2%, similar to where it has been for the last year, as shown in the chart below.

Source: Mortgage Bankers Association

The jobs report on Friday substantially changed views on when and how much the Federal Reserve Bank may cut interest rates. The odds of two rate cuts this year went from 48% after Chairman Powell’s press conference on Wednesday to 81% on Friday in the aftermath of the jobs data on Friday.  Short-term interest rates dropped a stunning 25 basis points on Friday, the biggest one-day rally in short-term bonds I can recall seeing, besides in significant crises. It is also interesting to note that there is now a 50% chance that we will see three cuts by the end of the year.

The committee would also like to note that we are heading into a historically difficult seasonal period for the markets. According to information from the Bespoke Group, the S&P 500 average performance during August since 1990 has been a decline of -.56%. The market has seen gains in just 54% of Augusts over the last 34 years. This ranks as the second-worst month of the year…only behind September's average decline of -0.84 %. Therefore, it would not surprise us to see volatility pick up again in the coming months.

We would like to remind our clients that economic and policy uncertainty generally leads to headlines that can move the market up or down on a day-to-day basis. We had a great example of this over the last few days. On Friday, the market decided bad news was bad news and sold off on the disappointing jobs report. However, on Monday, the market decided bad news was good news and rallied on hopes that the weak jobs number would cause the Federal Reserve Bank to cut interest rates.

Staying disciplined with your diversifications and not reacting emotionally have been proven strategies during challenging and volatile times. It is also important to remember that we are here for you during times of uncertainty or if you have questions about your financial plan or investment portfolio. Please do not hesitate to reach out to your advisor if you need anything. Thanks for your continued trust in our team and our process. Have a great day!

The views stated in this piece are not necessarily the opinion of Cetera Advisors LLC and should not be construed directly or indirectly as an offer to buy or sell any securities. Due to volatility within the markets, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.

Investors cannot invest directly in indexes. The performance of any index is not indicative of the performance of any investment and does not take into account the effects of inflation and the fees and expenses associated with investing.

A diversified portfolio does not assure a profit or protect against loss in a declining market.

Re-balancing may be a taxable event. Before you take any specific action be sure to consult with your tax professional.

Sincerely,

Jesse W. Hurst, CFP®, AIF®
Senior Financial Planner and CEO

*Award Recipient Jesse Hurst 

Forbes: Best-in-State Wealth Advisors Award received by Jesse Hurst, Senior Wealth Advisor, (2018-2024). The Forbes ranking of Best-In-State Wealth Advisors, developed by SHOOK Research, is based on an algorithm of qualitative data, rating thousands of wealth advisors with a minimum of seven years’ experience and weighing factors like revenue trends, assets under management, compliance records, industry experience, and best practices learned through telephone and in-person interviews. Portfolio performance is not a criteria due to varying client objectives and lack of audited data. Neither Forbes nor SHOOK receive a fee in exchange for rankings. Research summary as of April 2024: - 44,990 nominations received, based on thresholds - 23,876 invited to complete online survey - 20,412 telephone interviews - 4,926 in-person interviews at Advisor's location - 1,507 virtual interviews. Listing in this publication and/or award is not a guarantee of future investment success. This recognition should not be construed as an endorsement of the advisor by any client. No compensation was provided directly or indirectly by the recipient for participation or in connection with obtaining or using the third-party rating or award.

¹ This recognition and the due–diligence process conducted are not indicative of the advisor's future performance. Your experience may vary. Winners are organized and ranked by state. Some states may have more advisors than others. You are encouraged to conduct your own research to determine if the advisor is right for you. 

² Portfolio performance is not a criterion due to varying client objectives and lack of audited data. SHOOK does not receive a fee in exchange for rankings.