Dear valued client,
Markets finished relatively flat following a week of above-average volatility. After tumbling on Monday, the main indices recovered all their losses to close out the week where they started.
Cycles in the stock market and the economy at large are inevitable, typically following a sequence of growth, peak, sell-off, and recovery. Market selloffs often stem from investor anxiety rather than changes in company fundamentals, and despite recent economic soft spots, many companies remain fundamentally strong. A correction after substantial gains, like the 15% return seen in the first half of the year, is not unusual, especially in a late-stage economic cycle. These cycles are driven more by investor expectations than by current economic conditions, with optimism fueling stock rallies and pessimism triggering declines. The challenge lies in identifying the cycle’s phase, as real-time assessment is nearly impossible. Despite this uncertainty, history shows that long-term investors who stay the course, diversify, and avoid panic-selling during downturns tend to fare better, as markets recover and continue to rise over time.
In tech news, a federal judge ruled that Google acted illegally to maintain its monopoly over internet search, marking a significant antitrust victory for the government against a tech giant. The ruling found Google liable for paying companies like Apple and Samsung billions to be their default search engine, but it left the remedy undecided. Potential outcomes could include banning these payments, forcing Google to divest its search engine, or requiring it to share data with competitors, possibly paving the way for new or strengthened search engines like Bing or even an Apple search engine. While Google plans to appeal, the decision could reshape the search landscape and diminish Google’s dominance.
After a dynamic Democratic veepstakes, Vice President Kamala Harris selected Minnesota Governor Tim Walz as her running mate, unveiling the ticket at a rally in Philadelphia. Walz, a 60-year-old military veteran and former teacher, gained national attention recently for his blunt criticism of Donald Trump’s running mate, JD Vance, which resonated strongly within anti-MAGA circles. He has been labeled a “dangerous liberal extremist” from the other side of the aisle due to his handling of civil unrest in Minnesota. Walz’s strong labor endorsements could be an asset to help broaden Harris’s appeal in the general election.
“A ‘flash crash’ or some other extreme market fluctuation can’t hurt an investor any more than an erratic and mouthy neighbor can hurt my farm investment. Indeed, tumbling markets can be helpful to the true investor if he has cash available when prices get far out of line with values. A climate of fear is your friend when investing; a euphoric world is your enemy.” – Warren Buffett
Have a terrific weekend,
PW
