Market Insights Recap — Week of July 21, 2025

Hello, I'm Steve Orr, Chief Investment Officer for Texas Capital's Private Bank.

Well, it's a big week for economic data, earnings helping and Powell's D.C. drama. What do they mean for our portfolios? Last Thursday notched another all-time high for the tech-powered Nasdaq and S&P 500. Over the last couple of weeks, the rally has been led by tech, chiefly the Magnificent Seven. Breadth remains very low. In other words, there's still a lot of stocks sitting on the sidelines. So is the rally over? Hardly, we remain in a long-term bull market. The intermediate trend is up. Now the short-term trend will likely take a vacation after earnings season. Don't be surprised by a 3 to 5% correction next month in the context of a continued uptrend.

The big banks gave second quarter earnings a good start. Some notable names reporting this week include Tesla, Google, Coke, General Dynamics and Texas Instruments. Helping the market picture is a slowly improving economy. Early reads on second quarter data suggest the country fared a bit better than in the first quarter. Retail sales were unexpectedly strong in June. We may see some slowing in consumer spending once tariffs are finalized, but it's not showing up yet in the data. Out and about, we see airports full, hotels full. So folks are traveling this summer. 

Inflation continues to lurk in the background. Headline consumer price inflation is running at 2.7%. Stripping out falling gasoline prices and food, core CPI sits at 2.9% and it's grinding higher. The Fed remains on hold. They will not change short-term rates at their July 30 meeting. Lots of chatter out there recently about Trump considering firing Fed Chair Powell. Just know that's a very low possibility. More likely Powell would resign. We also put that as a low probability. Presidents have griped, complained and bullied Fed chairs since Woodrow Wilson pushed for creation of the Fed. Yes, Truman did force Thomas McCabe to resign under pressure. But the Fed is actually more independent from the president than Congress. Congress created the agency and dictates what the Fed can do. Now, originally, the Fed was supposed to add or subtract money from the banking system to keep the value of the dollar stable. Congress has added other jobs to the Fed plate that make it even tougher to focus on just a stable currency. Anyone out there know how to create full employment? We don't. Trump's name calling does not change the fact that rates are at least 1% above inflation. So the Fed does have room to cut. The money supply is growing at a 4.5% annual rate, almost double inflation. Growing faster than inflation provides plenty of liquidity for economic growth and continued pesky inflation. 

This week, we're watching sales of new and used homes, which continue to drift lower. Affordability and mortgage rates approaching 7% just continue to stymie sales, especially for first-time buyers. 

Let's wrap it up. Inflation is slowly moving higher. We expect consumer price inflation to top out around 3.5% at the end of next year. We're in the middle innings of the tariff game. More to come August 1st. Expect the stock rally to take a pause in the coming weeks. All of our indicators are shades of green, so there's no need to tweak positions. Let us know how we can help; 'til next time.