U.S. markets continue to make headlines, with big tech, interest rate speculation, and government policy driving much of the movement. But for long-term investors, the key isn’t just watching the news—it’s understanding what really matters underneath it all.
Here’s what we’re seeing in the markets right now, what the data is telling us, and how to think about the second half of the year.
Market Highlights: Big Tech and Earnings Drive Momentum
U.S. equities pushed higher again last week, with the S&P 500 and Nasdaq hitting fresh record highs. Technology companies, particularly chipmakers, led the way. Nvidia shares rose after news that it could sell its H20 AI chip in China. Financials also outperformed on strong earnings and a resilient consumer backdrop.
Meanwhile, some sectors lagged. Energy, healthcare, and materials underperformed, and managed care companies saw declines due to concerns over costs and potential changes to Medicaid funding.
🔑 Key takeaway: Despite political noise and policy shifts, strong earnings in key sectors are supporting equity markets. Diversification remains essential, as leadership continues to shift between sectors.
Inflation, Interest Rates, and the Fed: What the Data Shows
Inflation ticked slightly higher in June, with the Consumer Price Index (CPI) showing:
- Monthly core inflation: +0.2%
- Year-over-year core inflation: +2.9%
Producer prices came in softer, especially in travel-related services:
- Monthly change: 0.0%
- Year-over-year core PPI: +2.6%
Retail sales beat expectations after a weak May, and consumer sentiment edged up. But with inflation still above target, the Federal Reserve is likely to hold off on rate cuts until later this year.
👉 What this means for investors: The Fed is in wait-and-see mode. Bond yields firmed in response to inflation data, and rate cuts may not come until more evidence of cooling prices appears.
How Government Policy Is Shaping Market Behavior
Markets have reacted to a range of policy-related headlines:
- Positive momentum in chip stocks followed policy clearance for AI exports.
- Volatility increased briefly after reports (later denied) that the Fed Chair could be replaced.
- H.R. 1 (the recent budget bill) removed some fiscal uncertainty and clarified spending priorities.
Policy uncertainty remains, particularly around tariffs. With trade deadlines looming and negotiations ongoing, investor sentiment is sensitive to policy signals.
🔠Investor insight: While policies can move markets in the short term, focusing on long-term fundamentals—company earnings, valuations, and innovation—can help you stay grounded through political headlines.
Where Can Investors Find Opportunities in the Second Half of 2025?
Valuations remain elevated for some large-cap tech names but are more reasonable across other parts of the market. Small- and mid-cap stocks, value-oriented sectors, and international equities offer relative value and diversification potential.
AI continues to be a major growth driver, especially in technology and manufacturing. Meanwhile, housing-related data shows mixed signals: homebuilder confidence remains low, but housing starts and permits surprised to the upside in June.
🔑 Key takeaway: Portfolio diversification across size, style, and geography helps manage risk and capture shifting opportunities.
What to Watch Next: Earnings and Economic Data
It’s a lighter week for economic reports, but two releases could shape the market narrative:
- Wednesday, July 30: June existing home sales report (expected to decline slightly)
- Friday, August 1: Durable goods orders (expected to fall after a volatile May increase)
Earnings season will continue to drive headlines. As companies report across sectors, we’ll learn more about the tug-of-war between growth and value performance.
🧠Investor mindset: Use earnings season to evaluate how companies are performing through economic uncertainty. Keep an eye on broader trends—not just individual headlines.
Want to Talk Through Your Investment Strategy?
If you’re wondering how current market trends could impact your financial plan, we’re here to help.
👉 Schedule an introductory meeting to learn more.
Tom Hine is a CERTIFIED FINANCIAL PLANNER® professional and owner of Capital Wealth Management. With over 30 years of experience, Tom works with individuals and families on financial planning, retirement strategies, and investment management. He has a particular passion for special needs financial planning, shaped by his personal experience helping raise his sister Amy, who was born with a severe chromosomal condition. Tom understands the emotional and financial challenges that come with caring for a loved one with disabilities and helps clients navigate complex issues like preserving government benefit eligibility, coordinating Special Needs Trusts and ABLE accounts, and long-term care planning. With offices in Glastonbury and Wilton, CT, Tom serves clients across Connecticut and throughout the U.S. Schedule a complimentary introductory meeting with Tom.
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Certain sections of this commentary contain forward-looking statements based on our reasonable expectations, estimates, projections, and assumptions. These views are subject to change at any time. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results. Diversification does not assure a profit or protect against loss in declining markets.
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