Let the good times roll … just don’t mistake the rally for resolution
Equity markets just wrapped up what traders call a “perfect week.” All three major U.S. indices closed higher, with the S&P 500 notching its fifth consecutive record high and ending Friday at 6,388.
It’s a remarkable turnaround from just three months ago, when the S&P 500 touched a low of 4,835 during a sharp selloff triggered by sweeping tariff announcements on so-called “Liberation Day.” At the time, investor sentiment was fragile, and recession fears were gaining ground.
Since then, the index has rallied 32%* — fueled by resilient economic data, a steady approach from the Federal Reserve and signs of stabilization in U.S. trade policy (*Source: CNBC). But while the external tone has changed, we know from experience that individual investor outcomes are often shaped more by mindset than by market momentum.
At Elevage Partners, we understand that hope, like fear, can distort perspective. That’s why our approach is grounded in consistency, context and clarity — through every market cycle.
Chief Investment Officer Thierry Hasse
Trade Policy: From Shock to Structure
Last week, the U.S. and Japan finalized a trade agreement. In a sign of how sentiment has shifted, the 15% tariff level — initially viewed as punitive — is now seen as “a good deal” by Japanese exporters. When announced in April, even a 10% baseline was believed likely to plunge the world economy into recession. Now, deals are reshaping that narrative.
A similar deal was struck over the weekend with the European Union, which had been facing an Aug. 1 deadline before 30% tariffs would have been imposed. Under the deal, imports from Europe will face a 15% tariff, with exceptions made for certain products such as aircraft, which will not face tariffs.
A new world exchange order appears to be forming, with the U.S. asserting stronger influence over trade terms.
The Fed’s Balancing Act
Policy clarity hasn’t eliminated uncertainty — especially at the Federal Reserve.
Markets broadly expect the Fed to hold interest rates in the current 4.25% to 4.5% range. But the central bank is under mounting political pressure to cut, with critics arguing that monetary policy is now too tight relative to easing inflation trends. Meanwhile, Fed officials remain cautious, warning that premature easing could reignite inflation — especially in a post-tariff landscape.
As one anecdotal aside: scrutiny of the Fed has also intensified due to cost overruns in the renovation of its Washington headquarters. It’s not a policy driver, but a reminder that the Fed is operating in an unusually public spotlight.
Earnings Are Justifying the Rally
If a semblance of trade stability has created the conditions, corporate earnings are providing the confirmation.
Alphabet’s Q2 results are a prime example:
- Revenue reached $96.43 billion, up 14% from a year earlier, boosted in part by a weaker U.S. dollar.
- Net income rose to $28.2 billion, nearly 20% higher year over year.
- The company announced $85 billion in capital expenditures to expand its AI capabilities, citing “strong demand for their Cloud products and services.”
Alphabet isn’t alone. As of this writing, 80% of S&P 500 companies that have reported earnings have beaten analyst expectations (Source: FactSet). That level of corporate strength offers a more fundamental backdrop to what might otherwise look like sentiment-driven gains.
But Confidence Is Not a Substitute for Caution
As we’ve written in recent weeks, sentiment moves quickly. In April, the dominant emotion was fear. Today, it’s excitement — maybe even overconfidence.
That’s when investor psychology matters most.
It’s natural to feel pressure to act — to chase gains or avoid missing out. But our role isn’t to react to market mood swings.
It’s to help you stay anchored in your goals, strategy and risk tolerance — while still helping you answer the only questions that really matter: What does this mean for my plan, my future and my peace of mind?
What We’re Watching This Week
This week is pivotal:
- More than 40% of S&P 500 companies report earnings, including mega-cap names like Apple, Amazon, Microsoft and Meta. Market leadership is highly concentrated, so the tone and margins in these reports will carry weight.
- Economic data arrives Friday with both the employment report and the Fed’s preferred inflation measure (core PCE). Private payrolls are expected to increase by just 100,000 — marking a notable slowdown from 2024. At the same time, PCE is forecast to show a slight acceleration from the previous month (Source: Bloomberg). That’s a challenging mix for a Fed trying to walk a policy tightrope.
Final Thoughts
This rally has been powerful, and not purely emotional. There are real forces behind it, including emerging policy clarity, corporate strength and steady rates.
Still, it’s worth remembering: A rally can be impressive and feel like the hard part is over, but lasting resilience is built on preparation, not comfort.
At Elevage Partners, we remain focused on helping clients navigate both the data and the emotion that drive financial decision-making. It’s not about reacting to the mood of the moment. It’s about staying ready — on your terms, and in alignment with what matters most to you, your WHY.
The information contained herein represents the views of Elevage Partners at a specific point in time and is based on information believed to be reliable. No representation or warranty is made concerning the accuracy of any data compiled herein In addition, there can be no guarantee that any projection, forecast, or opinion in these materials will be realized. Any statement non-factual in nature constitutes only current opinion which is subject to change. These materials are provided for informational purposes only and do not constitute investment advice. Any reference to a security listed herein does not constitute a recommendation to buy, sell, or hold such security. Past performance is no guarantee of future results. The historical returns of any securities and/or sectors mentioned in this commentary are not necessarily indicative of their future performance.