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Small Value stocks (+9%) posted their best return since November 2024. Within our L3000 universe, this style box’s median P/E multiple is still well below its 43-year average.

The S&P 600 had its best month (+7%) relative to the Equal Weighted S&P 500 (+3%) since November 2024. Measured back to April, our Small Cap discount has shrunk from 26% to 19%.

Be it the S&P 500 or MSCI USA Index, U.S. Large Caps are on par with the valuation extremes reached in 1999/2000, and again in late 2021—but they aren’t entirely at the point of qualifying the market as the most expensive of all time. (Give it a few more months, perhaps.)

The Up/Down ratio reads 1.52 and is the highest “two-month” tally since the beginning of 2022. Like our “one-month” figure from July’s reports, this observation is just slightly above the study’s 41-year average. Forward earnings for small- and mid-cap indexes are finally coming alive as well.

Commercial hedgers’ bullish activity the last two months has triggered a series of buy signals on the Russell 2000 and DJIA. Conversely, hedging by the same savvy cohort of futures traders tripped a double-sell on the posterchild for Large Growth: the NASDAQ 100.

To the extent that inflation has been propped up by escalating asset prices, it could also prove to be self-correcting. While rising stocks prices have only been inflationary once in a while, falling stock prices have almost always been disinflationary.

Not only is the stock market no more expensive than in February, but it’s also looking internally more healthy. At the February 19th high, seven of the eight bellwethers were waving warning flags versus just four today.

There are unmistakable parallels between September’s likely Fed rate cut and the initial lowering of rates preceding the GFC. In each case, despite leading inflation gauges still trending up, a housing slump and deteriorating labor market served to justify the move. In 2007, after the Fed cut, measures of real growth failed to respond and inflation, in fact, shot higher.

The Fed has been neither correct nor anticipatory for an extended period of time. Ironically, if a September rate cut were followed by a decline into recession later this year, the Fed may be hailed as both correct and anticipatory—and some semblance of Fed independence could be maintained.

After a springtime scare, the stock market has shrugged off more than its fair share of troubles. We offer some quick observations on a range of topics, including our stance on the bull market and historical comparisons, IPO and speculative activity, equity leadership, and the economy/interest rates/inflation.

A Fed that’s been incapable of controlling the intensity of the flame will soon be supplying it with more oxygen in an attempt to stimulate real activity. The odds are that any new fuel on the fire will find its way into consumer prices, long before it stimulates “unit growth” in slumping sectors.

Inflation and bond yields, alike, remain well behaved, which is a positive for risky assets. Among fixed income, we are still constructive toward higher-quality credit.

An examination of how large- and small-cap companies allocate cash across three main uses: investment (Capex and R&D), shareholder returns (dividends and buybacks), and M&A. We further evaluate how, over time, the market rewards or penalizes each.

The second quarter of 2025 posted another “all green” earnings waterfall, as each component of our profit breakdown gained ground. Sales growth was a robust 6.9%, paving the way to a 17.6% gain in net income for S&P 500 members

The Magnificent 7 constitutes 34% of the S&P 500 and comprises seven of the eight largest companies in the index. We explore a few of the disguises the market has been wearing during this mega-cap growth era, looking behind the mask at the broad swath of equities hidden by the Mag 7’s dazzling veil.

Read this week's Major Trend.

The S&P 500 notched its fourth consecutive monthly gain through August, advancing 2%. Over that span, our downside estimate for the index to return to its historical median level (1995-forward) widened from -24% to -32%.

The S&P 500’s Q2 estimated bottom-up operating EPS has now increased 4% since the start of reporting. This V-shaped recovery has erased the discount in earnings seen after “Liberation Day”; EPS estimates now stand even with those at the end of March. Despite the higher revisions for the current quarter, projections for the final two quarters of 2025 have only leveled off from their tariff-scare down-leg.

Read this week's Major Trend. 

• Read the latest MTI update