Presenters: Lowell Pratt, CFA, Andy Pratt, CFA, CAIA, and Adam Newman, CFA, CFP®
Here is the webinar recording from July 16, 2025. You can browse the topics discussed and main takeaways using the sections and time stamps below:
Click the time stamp in each section title to jump to that part of the video on a new screen.
Introduction and New Podcast (00:00)
- This quarter provided very solid returns on both an absolute and relative basis.
- We will discuss the recently enacted "big beautiful bill" and its investment implications.
- A new podcast, "The Long Story Short," has launched with weekly 30-45 minute episodes covering markets to financial planning. Episodes are released every Friday on Spotify, Apple Podcasts, and YouTube.
Q2 Market Performance Overview (02:30)
- Despite a 19% top-to-bottom market decline, trade war discussions, and Middle East tensions, the market showed incredible resilience with a V-shaped recovery.
- Global stock markets bounced double digits, with the US market up about 11% and international and emerging markets up about 12%.
- This resilience was driven mainly by earnings, the health of the labor market, and consumer strength.
- Fixed income posted an average quarter despite yield and currency movements around trade discussions.
- The market's focus on fundamentals over headlines was a great reminder of its underlying strength.
Long-Term Market Summary (07:44)
- Market returns are now showing broader participation beyond the "Mag Seven" technology stocks, with sectors like industrials and utilities leading the rebound.
- Wall Street strategists' annual price targets often move reactively with market performance, making them unreliable predictors.
- Global participation in the stock market rally has broadened, with international developed equity leading for the first time in years.
- Bond returns have stabilized with higher starting yields after the historic 2022 decline, providing better forward-looking opportunities.
- The current environment shows encouraging trends for both domestic and international investments after years of US-only outperformance
Don't Fear All-Time Highs (09:19)
- Despite an almost 20% market decline just months ago, questions arise about all-time highs and whether investors should take profits.
- All-time highs are actually a positive indicator for future stock returns, with forward-looking returns from these levels typically being higher.
- Above-average returns tend to cluster around one another, suggesting investing from a position of strength is favorable.
- The current broad-based rally occurs from a favorable economic backdrop with strong fundamentals supporting the market.
Household Leverage and Unemployment Rate (11:24)
- Despite headlines about consumer debt and credit card debt reaching new all-time levels, household leverage (ratio of liabilities to net worth) remains at record low levels.
- While liabilities might be rising slightly on a dollar basis, assets are rising at a much greater pace, creating a very under-leveraged consumer with US households in better shape than historically.
- The job market continues to show incredible resilience, with unemployment still hovering around 4%, defying expectations of spikes that were anticipated since 2022 rate hikes began.
- While wage growth is slowing from previously aggressive levels, the labor market has remained steady in a higher rate environment where the economy is still growing but slowing down appropriately.
- This represents a really steady labor market performance that has consistently surprised to the upside, contributing to the overall positive economic backdrop.
Understanding the One Big Beautiful Bill Act (OBBBA) (13:50)
- The 900-page OBBBA permanently extends the 2017 Tax Cuts and Jobs Act income tax rates, providing planning certainty.
- The SALT limit increases to $40,000 for 2025-2029, phasing out for incomes over $500,000 and returning to $10,000 at $600,000.
- A new senior deduction allows those 65+ to deduct an additional $6,000 per person through 2028, regardless of itemizing status.
- The estate tax exemption permanently increases to $15 million per person, allowing married couples to transfer $30 million without estate tax.
- The mid-year passage provides six months for proactive planning around Roth conversions, distribution planning, and wealth transfer strategies.
*You can find our full explanation of the OBBBA and what it may mean for you in our latest blog: Understanding the One Big Beautiful Bill Act (OBBBA): What High Net Worth Families Need to Know.
How We Handle Volatility (24:12)
- Comparing feelings from the April market stress to today's all-time highs illustrates the difference between "hot states" and "cold states" of thinking.
- In hot states, fear responses overwhelm rational thinking, while cold states allow for clearer decision-making.
- Planning now for future market declines, while in a rational state, helps prepare for inevitable volatility.
- Staying the course during tough times is the most important factor for long-term investment success.
Size and Style Performance (27:16)
- The past month saw unusual performance with both large growth stocks and small value stocks performing well, despite typically being opposites.
- Large growth includes trillion-dollar technology companies like Apple, Meta, Microsoft, and Nvidia.
- Small value companies typically have one to two billion in market cap and are often profitable but "boring" companies.
- Year-to-date, large caps (especially large growth) have significantly outperformed smaller market segments.
Large Cap Dominance (28:59)
- The "wave chart" shows mostly red (large-cap outperformance) over the past decade, with only brief periods of small-cap strength.
- Small-cap stocks performed well coming out of COVID and had momentum in early 2023, but large-cap dominance has been the primary trend.
- The market appears to be rotating towards value overall, with a clear trend line developing over the past year.
- However, large-cap and mid/small-cap stocks are behaving differently, with large growth maintaining momentum since 2023.
Mid Caps Favor Value (23:17)
- Mid-cap stocks ($2-10 billion market cap) show the opposite trend from large caps, with value significantly outperforming growth.
- Mid-value had strong outperformance coming out of COVID, followed by a short pro-growth period from 2023 to mid-2024.
- Since mid-2024, there has been sustained mid-value outperformance over mid-growth stocks.
- This creates an interesting dynamic where large growth outperforms large value while mid-value outperforms mid-growth simultaneously.
Small Caps: No Clear Trend (32:57)
- Small caps experienced a big value rally from 2020 to 2023, followed by a growth move downward.
- Since then, the trend has been sideways with a short, small-value rally before slipping back down around Liberation Day.
- The small-cap situation remains unclear compared to the clearer trends in the large and mid-cap segments.
- While small caps lack direction, there appears to be momentum building back towards small value again.
New Style for Large, Mid, and Small Caps (33:36)
- For the first time, the style decision (value vs. growth) has been separated by market cap, with large caps leaning growth and mid/small caps leaning value.
- Portfolio allocation shows 80% in large caps (with large growth weighted higher), while mid and small caps favor value over growth.
- This approach plays both growth and value simultaneously, depending on company size, as a reaction to real-time market data.
- The AI trade likely contributes to this trend, with the biggest winners being mega-cap companies like Microsoft, Meta, and Nvidia.
- This divergence appears to be uniquely a US mega-cap phenomenon, with value expected to outperform growth long-term in mid and small caps, as well as internationally.
If you have questions like these or wish to discuss your financial planning needs, Schedule a Meeting with us.
CNBC’s annual FA 100 ranking was published on 10/2/2024 for the year 2024. The Burney Company did not pay CNBC any compensation for being considered for the list, however, Burney Company does pay a licensing fee to use the CNBC logo in marketing materials. A link to the CNBC selection criteria can be found by going to https://cnb.cx/3Pg6FVh. The CNBC award was given to the Burney Company, which includes portfolio managers associated with Burney Wealth Management and nine other affiliated portfolio managers.