This week’s Steady Investor takes a closer look at the key market developments investors should be watching, including:
In a Noisy News Cycle, Earnings Continue to be the Top Story for Investors – It’s been a volatile patch for U.S. stocks for the past few weeks, but investors should always remember—volatility works both ways. Despite plenty of reasons for investor concern, from trade policy uncertainty to geopolitical tensions and questions about inflation, stocks have mostly returned to rally mode. One key reason: corporate earnings continue to come in stronger than expected. As of July 31st, 61% of S&P 500 companies had reported second-quarter results, and of those, 86% beat earnings estimates. That’s well above the 5-year beat average of 78% and the 10-year average of 76%. Companies are also beating by more than usual, with aggregate earnings coming in 31.4% above estimates, the highest surprise percentage in well over a decade. Admittedly, the headline numbers are inflated by unusually large one-time gains from Alphabet and Amazon. But the broader picture still looks strong. Excluding those two results, S&P 500 earnings growth would still be 28.8%, which would mark the second straight quarter above 20% and the seventh consecutive quarter of double-digit earnings growth. Revenue trends also look healthy. We’ve seen 77% of reporting companies beat revenue estimates, with blended revenue growth running at 14.1%. That’s the highest level since 2021.1
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Markets don’t move in a straight line. Inflation, interest rates, and economic conditions can all affect your retirement savings, making it important to have a plan for different market environments.
Our free guide, 4 Ways to Protect Your Retirement from Rising Inflation², explores strategies to help you prepare for inflation and stay focused on your long-term goals. You’ll learn:
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Why is the United States Intervening to Support the Japanese Yen? This week, the U.S. and Japan intervened jointly to support the yen—for the first time since 1998—after the currency slid toward 164 per dollar, its weakest level in roughly 40 years. The policy concern is understandable. A rapidly falling yen can add to Japanese inflation, raise import costs for an energy-dependent economy, and create stress in currency markets. U.S. officials also have an interest in avoiding any forced selling of Japanese-held Treasurys, since Japan owns roughly $1.1 trillion of U.S. government debt (for context, if Japan sold off a large amount of Treasurys to support the yen, it could put upward pressure on Treasury bond yields, raising borrowing costs for U.S. consumers and businesses). Japan has said it may use the Fed’s FIMA repo facility, which allows foreign central banks to borrow dollars against Treasury collateral, instead of selling Treasurys outright.In our view, while this story seems concerning on the surface, investors don’t necessarily need to overstate the risk. Japan has intervened to support the yen multiple times in recent years without triggering a Treasury-market crisis, and Japan’s foreign reserves remain large—roughly $1.29 trillion at the end of June.The yen’s weakness is worth watching, but this looks to us more like a policy-management issue than a market-shaking crisis.3
Capital is Moving Toward U.S. Housing, But Costs Remain High – The U.S. housing market remains stuck between two forces: strong underlying demand for homes and persistent affordability pressures that keep many buyers on the sidelines. JPMorgan is positioning to assist on the financing side of the equation. The bank said it plans to invest $750 billion through 2035 as part of a broader initiative to support homeownership, including financing for 1 million affordable housing units and helping 500,000 people buy homes. The bank also said it aims to increase mortgage lending by more than 40% and provide loans to 200,000 first-time buyers.
That kind of commitment speaks to the scale of the housing challenge. But financing alone does not solve the problem if building remains expensive. Lumber prices recently climbed to their highest level in nearly four years, with the ‘Random Lengths Framing Lumber Composite’ reaching $535 per thousand board feet, up 23% from a year earlier. Unlike the pandemic-era surge, this move appears driven less by booming demand and more by reduced supply, including sawmill closures and lower imports tied partly to tariffs on Canadian lumber. For investors, the takeaway is that the outlook for the housing sector is still unsettled. Demand is there, and capital is moving toward the market, but high mortgage rates, elevated home prices, and construction-cost pressures continue to limit affordability.4
Shield Your Retirement from Inflation – Rising prices can make it harder for your retirement savings to go as far as you planned. While no one can control inflation, you can take steps to help protect your portfolio.
Download our free guide, 4 Ways to Protect Your Retirement from Rising Inflation⁵, to learn practical strategies that can help your retirement savings keep up with rising costs over time, including:
If you have $500,000 or more to invest, get our free guide today!
Disclosure