What a difference one quarter can make. As we look back, in early April the market was in complete panic primarily driven by President Trump’s escalating trade war with China, specifically his announcement of new and expanded tariffs. This created significant uncertainty and fear among investors, leading to sharp sell-offs. Since then the market has staged a remarkable recovery in part because the President put a 90-day suspension on those additional tariffs back on April 9th. As of today, the July 9th deadline for potential tariffs seems to have been pushed back to August 1st, but the ongoing uncertainty surrounding trade deals and tariff rates is unsettling the market. Despite this, the economic data, including jobs, corporate earnings, and inflation, has generally remained strong, supporting market confidence despite some warnings of potential headwinds.
Market breadth is generally considered to be expanding, particularly in the context of the current stock market rally. This means more stocks are participating in the upward movement, rather than just a select few. Initially, the rally was heavily concentrated in the “Magnificent 7” tech stocks, but recently, other sectors like financials and industrials have joined the gains. As more sectors participate, it opens up opportunities for investors to find value and growth beyond the previously dominant tech stocks. This has been our mission for a few years now finding undervalued securities that have not been part of the rally, most of which have very good dividends. Their time will come as the market breadth continues to expand. We have been reallocating as we anticipate this widening will continue over time.
As a bull market matures, company research becomes increasingly important because broad-based gains give way to greater dispersion between winners and losers. Valuations often become stretched, making it crucial to separate fundamentally strong businesses from those driven by hype or momentum. As investor sentiment grows more euphoric, solid research helps anchor decisions in reality and manage portfolio valuations. In short, deeper into a bull market, selectivity and disciplined analysis become essential for portfolio risk management.
