July 18, 2025

In the Loop – July 18, 2025

“In The Loop” is designed to give you a short update reflecting major developments, earnings, and investment trends across some core Equity Income and Growth holdings. All clients should be aware that individual buy/sell recommendations will be conveyed directly to you on an individual basis. Have a great weekend.

With The S&P500, Dow Jones Industrial Average and the Nasdaq 100 bumping up on All-Time highs, many of us are asking ourselves the same question. Many want to know if the current market rally is sustainable and are concerned about how volatility, interest rates, and inflation might affect their investments. Some are asking,“Should I make changes to my portfolio in light of recent market swings or global events?” Others are curious about whether it’s a good moment to deploy extra cash or rebalance allocations. Questions about the Federal Reserve’s plans for interest rates, the outlook for inflation, and how global politics (especially U.S.-China trade relations and Middle East tensions) could impact the markets remain front and center. Many clients are also seeking reassurance about long-term goals, wondering if they need to adjust retirement plans or risk strategies, and what steps they should take to safeguard their assets during uncertain times. Our consistent message is to stay focused on long-term plans, keep portfolios diversified, and avoid making emotional decisions during periods of heightened market noise; history shows that those who maintain discipline and allow for short-term volatility are typically rewarded over time.

Renewed Tariff Rhetoric

Let’s start by recognizing that the Treasury Department reported a record $26.6 Billion in customs duties in June, producing a surprise $27 Billion budget surplus for the month. Treasury Secretary Scott Bessent expects to collect $300 Billion in tariff revenue in 2025. The pros of this strategy are to help reduce federal borrowing, cap the rise in national debt and help service existing interest obligations. (Which we will touch on in a minute) The cons are it takes us in uncharted waters. So far it has had a limited impact on inflation, but that could change in the coming months. August 1, 2025, is the next scheduled deadline for negotiations and I believe the President will hold this deadline and this could cause some downside pressure on markets, albeit not as bad as April. The markets seem willing to accept this as the new normal.

Interest Rates and Chairman Powell

I do not think the President is going to fire Chairman Powell. However, he is looking for a replacement when his term ends next year. I would expect his replacement to take a more dovish stance on interest rates. Remember, as a country we have a lot of debt. If the Federal Reserve was able to lower rates across the curve, it could save “trillions” in interest expense over the next decade. Yes, it could hit the dollar. However, imagine a policy of higher tariffs and lower dollar. This could cause imports to look expensive and US exports to look cheaper, falling in line with the primary goal of manufacturing more in the USA. This would be different than the “strong dollar” policies in the past. It will be interesting to see how this plays out.

“One Big Beautiful Bill”

There is so much information within this Bill that we are still researching. However, our quick take is that it is going to be good for U.S. growth with the largest boost expected to come in 2026.

With so many new and emerging technologies like AI, Robotics and Automation, Space Exploration, Drones and Driver-less Cars, it is an exciting time to be an investor.

Company Updates
Taiwan Semiconductor Manufacturing (TSMC)

Reported a 39% year-over-year increase in Q2 revenue, reaching $32 billion, driven by strong AI demand and surpassing analyst expectations. First-half 2025 revenue rose 40% YoY, reinforcing TSMC’s critical role in powering major tech firms like Nvidia, AMD, and Apple. Wall Street expects a 61% YoY increase in EPS when the company releases full Q2 results on July 17.

Alphabet (GOOGL

Has made several strategic moves. Reports indicate Google is offering deep cloud discounts to the U.S. government, similar to Oracle’s deal. Google also secured a $200M Department of Defense AI contract and acquired a $2.4B licensing deal with Windsurf for AI coding tech. Additionally, it signed a $3B hydropower PPA with Brookfield to support AI infrastructure, aligning with its $25B data center investment plan.

Arista Networks (ANET)

Saw Citi raise its price target to $123 and initiate a 90-day positive catalyst watch. Analysts highlighted rising Ethernet switch demand and robust hyperscale capex as key drivers, reflecting optimism for further upside in the datacenter networking segment.

Vertiv (VRT)

Rebounded after initial declines following AWS’s announcement of an in-house liquid cooling system. Analysts including JPMorgan and UBS dismissed the threat, noting AWS will likely still rely on suppliers for critical components. Multiple firms raised price targets, affirming confidence in Vertiv’s long-term growth.

Salesforce (CRM)

Reached a major milestone with Agentforce, its autonomous AI support tool, now handling over 1 million customer conversations and resolving 85% of cases without human input. This performance demonstrates Agentforce’s scalability and potential as a future growth driver.

JPMorgan Chase (JPM)

Reported strong Q2 results, with adjusted EPS of $4.96 and trading revenue up 15%. The bank raised its full-year NII forecast to $95.5B and announced a new $50B share buyback. CEO Jamie Dimon expressed confidence in the U.S. economy while warning of macro risks.

PepsiCo (PEP)

Is expected to report Q2 EPS of $2.03 on July 17, down nearly 11% YoY, with revenue projected to decline slightly to $22.23B. The company anticipates low single-digit organic revenue growth in FY25, but expects a 3% drop in core EPS, citing supply chain costs and consumer caution as ongoing headwinds.

We remain focused on navigating market trends and positioning portfolios for long-term growth and resilience.
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Formidable Asset Management (“Massey Romans Capital”) is an investment adviser registered under the Investment Advisers Act of 1940. The information presented in the material is general in nature and is not designed to address your investment objectives, financial situation or particular needs. Prior to making any investment decision, you should assess, or seek advice from a professional regarding whether any particular transaction is relevant or appropriate to your individual circumstances. Although taken from reliable sources, the Firm cannot guarantee the accuracy of the information received from third parties.

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