Commentary:
U.S. stocks continued to climb in July, marking the third consecutive month of gains for the S&P 500, as volatility remained subdued compared to the first half of the year. Easing trade tensions and tariff concerns were key drivers of the bullish sentiment, while a strong start to earnings season and a resilient macroeconomic backdrop added further support. Big tech stood out, fueled by ongoing optimism around AI-driven secular growth and a pickup in deal activity. However, the strength of the economy, coupled with a hawkish tone from the July FOMC meeting, has dampened expectations for imminent rate cuts. Overall, markets remain resilient.
The U.S. negotiated several successful trade agreements in the month leading up to the August 1st pause on reciprocal tariffs with the EU and Japan. Additionally, rhetoric between the U.S. and China turned more positive as both sides continued to make progress ahead of the upcoming August 12th deadline.
Despite ongoing tariff concerns, markets have held up relatively well this year. Investors appear more focused on the reduced uncertainty surrounding trade policy than on the specific tariff rate announcements. However, caution remains as the impact of tariffs may accelerate in the second half of the year, potentially weighing on job growth and consumer spending.
The Federal Reserve held interest rates steady at its July meeting, despite recent pressure from President Trump to lower them. Fed Chair Jerome Powell emphasized the need for more economic data before considering any rate cuts, particularly given the inflationary impact of ongoing tariffs. The next FOMC meeting is scheduled for September 16–17.
Small- and mid-sized companies continue to trade at historically wide valuation discounts relative to their large-cap counterparts. Structural factors such as increased M&A activity, reshoring, insulation from multinational dynamics, declining interest rates, shifts in corporate tax policy and deregulation create a compelling landscape for smaller capitalization companies.
The valuation of the Russell 2000 Value remains compelling, currently trading at ~13x estimated earnings for the next twelve months versus ~24x for the S&P 500. This attractive valuation differential underscores the importance of valuations as a strong determinant of long-term performance.
July 2025 Performance
| (July 31, 2025) | Growth | Core | Value |
| Russell 1000 (Large Cap) | 3.8% | 2.2% | 0.6% |
| ” 3000 (All Cap) | 3.7 | 2.2 | 0.6 |
| ” 2000 (Small Cap) | 1.7 | 1.7 | 1.8 |
As value-oriented stock pickers, we find the current market conditions exceptionally favorable for our methodology. Our focus remains steadfast on identifying exceptional businesses trading at a discount to Private Market Value, with catalysts to surface value. We will continue to use the volatility provided by Mr. Market to increase our stakes in great companies at attractive prices.
Kevin V. Dreyer Christopher J. Marangi
Important Disclosures
This letter was prepared by Kevin V. Dreyer and Christopher J. Marangi. The examples cited herein are based on public information and we make no representations regarding their accuracy or usefulness as precedent. The views are subject to change at any time based on market and other conditions. The information in this letter represent the opinions of the individuals as of the date hereof and is not intended to be a forecast of future events, a guarantee of future results, or investments advice. The views expressed may differ from other Research Analysts, Portfolio Managers, or of the Firm as a whole.
