Markets Keep Rollin'

The resiliency of markets in 2025 has been something to behold. Tariffs, Fed Policy, Corporate Earnings - nothing seems to slow equities from rolling along. At some point,

markets will hit a wall, Until then, investors should enjoy the ride. This week's inspiration for the musings is the classic song, "Proud Mary." Here’s some trivia about the song:

• The song was first recorded by Creedence Clearwater Revival in 1969. Lead guitarist John Fogerty wrote the song after being discharged from the National Guard (hence the line, "Left a good job in the city"). Fogerty arranged the song from parts of different songs, one of which was about a washerwoman named Mary. The "Proud Mary" was a real steamboat on the Mississippi River, based out of Memphis, Tennessee. The river in the song offers a place of rebirth and nurturing of spirit to the singer of the song.

• Creedence's version reached No. 2 on the Billboard charts in March of 1969. The song has been covered by multiple different artists, including Elvis, Prince, Neil Sedaka, and Leonard Nimoy (and yes, that's the Nimoy who played Spock on "Star Trek"). However, my favorite cover was by the Ike & Tina Turner Revue in 1971. Their version, which starts "nice and easy" and finishes with a faster, upbeat tempo, reached #4 on the Billboard charts, but also won them a Grammy for Best R&B Vocal Performance by a Group.

• Tina Turner continued to sing the song after her split with Ike in 1976. She also recorded versions of the song on her "Tina Live In Europe" and "All The Best" albums.

• The song seems eerily connected to Turners life. She was born into poverty in Brownsville, Tennessee (about 45 miles from Memphis). Rose to stardom in the '60s & '70s, all while enduring an abusive marriage. She was thrown into debt when she left Ike, as he saddled her with the band's owed liabilities, only to rise to stardom again, on her own, why working her tail off. She passed away two years ago worth more than $250 million. What a story!

"Cleaned a lot of plates in Memphis

Pumped a lot of pane down in New Orleans

But I never saw the good side of the city

'Til I hitched a ride on a river boat queen

Big wheel keep on turnin'

Proud Mary keep on burnin'

Rollin', rollin' (rollin'), rollin' on the river

Rollin', rollin', rollin' on the river

If you come down to the river

Bet you gonna find some people who live

You don't have to worry 'cause you have no money

People on the river are happy to give

Big wheel keep on turnin'

Proud Mary keep on burnin'

Rollin', rollin', rollin' on the river

Rollin', rollin', rollin' on the river"

Here's what we've seen so far this week..

More Fed Drama. The Fed came under more heat this week as the President asked for Fed Board member Lisa Cook to step down over possible mortgage fraud.

So far, there have been no formal charges against Cook. However, later in the week, the President formally announced he was removing Cook from her position. This creates a fascinating political battle in D.C. Does the President have the authority to remove a Fed Board member? The Chief Executive has the power to nominate to the Board, with Congressional approval. This issue will likely go to the courts, as Cook has thus far refused to step down. However, the bigger issue is what will the Fed look like if the courts affirm the President's power? Bowman, Waller, & Miran (if confirmed) would likely be on the President's side with regard to rate cuts. Waller & Bowman both "abstained" in the vote to affirm Chicago Fed governor Goolsbee. If Goolsbee were then removed, there would potentially be 5 Fed members likely in the President's camp.

Despite all of the drama, markets keep on rollin'. The futures for September's Fed meeting have barely moved from last week. There's still an 86% probability of a rate cut next month. Equity markets have moved higher for the month of August and interest rates on the 3mth, 2yr, and 10-year Treasuries have moved lower throughout the week. Has the market lost faith in the Fed?

Economy Still Rollin'? We have been told since nearly the beginning of the year that the U.S. economy was heading for recession. That sentiment picked up steam after

April, when the President announced higher tariffs. Yet, the economy has not fallen off a cliff. This week, the second revision of Q2 GDP was revised higher from 3.0% to 3.3%. The consumer, who was supposed to scale back spending due to tariffs has been resilient. Redbook Sales this week moved higher to 6.5%, well above the historical average of 4.4%, and has remained elevated through most of the year. Several surveys - University of Michigan being a prime example, have called for poor consumer sentiment and rocket high inflation that have not materialized.

The strength of the consumer and the fact that companies and exporters have eaten most of the tariff costs so far has kept GDP in solid territory. This morning, the Atlanta Fed revised their estimate of Q3 GDP higher (the St. Louis & NY Fed Q3 GDP forecasts were subsequently revised higher, as well). After drifting lower toward 2% for the last several releases, the estimate shot up to +3.5% in this morning's latest release. In fact, the Net Export component of GDP is projected to be in the positive with this latest estimate, which would be the first positive reading since January. With Initial Jobless Claims and Continuing Claims having stabilized throughout the year and no where close to typical recessionary levels, consumers have jobs, money in their pockets, and they are spending. This will likely keep corporate earnings coming in at a solid pace when Q3 profits are released. As we stand here today, the economic backdrop looks solid.

Market Slowdown?  Equity markets were trading higher for the week until today's trading started out in the red. It's possible AI is beginning to weaken slightly as the

bar for higher earnings is dependent on Nvidia's H20 chip. Nvidia earnings were solid, but there are concerns about the company's hampered sales of chips to AI giant China. Nvidia is said to be in negotiations with the Trump Administration to ease Chinese access to Nvidia's AI chip. This morning, Chinese e-commerce company Alibaba announced the development of a high-powered AI chip that could rival Nvidia's, thereby making sales to China by Nvidia irrelevant. Nvidia is trading down more than 3% so far today and Mag 7 names are dragging the market down, as well. The picture for the rest of the market is not as bleak, as Financials, Energy, Healthcare, Real Estate, Consumer Staples, and Materials sectors are all trading in the positive today (so far). This could lead credence to the possibility sector rotation is occurring in the market.

Barring a full meltdown today on the S&P 500 Index, equities will trade in the positive for the month of August. If that is indeed the case at the end of today, that means that

August will have defied historical return odds. The month of August has historically been positive only 56% of the time, going back to 1964. Even more notable, if August does indeed end positive, it will be the first time that August was positive in a post election year under a Republican-led White House. Regardless of who is in office, when markets do things that they are not supposed to do, either to the positive or the negative, investors should pay attention. Historically, September and October are the more volatile months of the year and do not typically end in the positive. A rate cut by the Fed and any further positive economic data could upend that average. Time will tell, but for now, markets should keep on rollin' down the river.

Watch Tina do her thing...

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