The Markets
U.S. companies have been hitting it out of the park!
Earnings season happens four times every year. It’s the period of time when publicly traded companies report how they performed during the previous quarter. So far, in aggregate, the companies in the Standard & Poor’s (S&P) 500 Index have delivered solid results for the second quarter of 2025.
“Overall, 66 [percent] of the companies in the S&P 500 have reported actual results for Q2 2025 to date. Of these companies, 82 [percent] have reported actual EPS [earnings per share] above estimates, which is above the 5-year average of 78 [percent] and above the 10-year average of 75 [percent]. If 82 [percent] is the final number for the quarter, it will mark the largest percentage of S&P 500 companies reporting a positive EPS surprise for a quarter since Q3 2021 (also 82 [percent]),” reported John Butters of FactSet.
While many U.S. companies had an excellent second quarter, economic clouds are shadowing investor optimism.
“Investors are struggling with a contradiction at the heart of the market as stocks move into their toughest months of the year. On the one hand, earnings have been strong. On the other, economic data are showing signs of weakness. How the two variables play out could determine whether the stock market can keep rallying to new highs—or stumbles into an end-of-summer selloff,” explained Martin Baccardax of Barron’s.
Recent economic data show a softening labor market and weaker consumer spending. (Consumer spending is the primary driver of U.S. economic growth.) In addition, activity in the manufacturing and service sectors slowed. Nazmul Ahasan of Bloomberg reported:
“The Institute for Supply Management’s index of services declined last month to 50.1, below all estimates in a Bloomberg survey of economists. Readings above 50 indicate expansion…The data, released Tuesday, paint a picture of a sluggish service economy wrestling with the fallout of higher tariffs, cautious consumers and [policy] uncertainty…The services sector is by far the largest in the U.S. economy, and has helped drive growth this year while the manufacturing industry contracted for five straight months.”
Last week, the major U.S. stock indexes rallied. The Nasdaq Composite Index closed at a record high, while the Standard & Poor’s 500 Index and Dow Jones Industrial Indexes finished the week close to new highs, reported Amalya Dubrovsky , Brett LoGiurato and Laura Bratton of Yahoo! Finance. U.S. Treasury yields generally moved higher. The 30-year Treasury bond yielding 4.85% at the end of last week.
| Data as of 8/8/25 | 1-Week | YTD | 1-Year | 3-Year | 5-Year | 10-Year |
| Standard & Poor’s 500 Index | 2.5% | 9.4% | 21.6% | 17.3% | 15.5% | 13.9% |
| Vanguard Total Intl Index (Foreign Stocks) | 3.2 | 20.5 | 21.7 | 13.2 | 9.3 | 6.6 |
| Total Bond Market (U.S. Dollar Bonds) | -0.2 | 4.4 | 3.6 | 2.1 | -1.0 | 1.7 |
| Gold (per ounce) | 1.4 | 30.0 | 40.8 | 23.9 | 10.7 | 12.0 |
| Bloomberg Commodity Index | 0.2 | 2.1 | 5.8 | -4.9 | 7.3 | 0.9 |
S&P 500, Vanguard Total International Stock Index, Vanguard Total Bond Market Index, Gold, and Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized. Sources: Yahoo! Finance; MarketWatch; morningstar.com; djindexes.com; London Bullion Market Association. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.
BURGERNOMICS: A LOOK AT THE BIG MAC INDEX. During the first six months of 2025, the United States dollar delivered its worst performance since 1991. “The U.S. Dollar Index, which measures the value of the greenback against the world’s six most traded currencies, has lost almost 11 [percent] of its value…,” reported Valerio Baselli of Morningstar.
The drop in the U.S. dollar’s value hasn’t made as big a difference as some might have expected – at least when it comes to buying burgers abroad.
Since 1986, The Economist has been using the “Big Mac Index” as a lighthearted way to measure the relative value of currencies across the world. In theory, if currency exchange rates are properly aligned, a burger should cost the same no matter where it is purchased. (This is known as purchasing-power parity.) That’s rarely the case, so the index helps identify which countries’ currencies are overvalued or undervalued.
“Purchasing-power parity suggests that, with a Taiwanese Big Mac costing 78 Taiwanese dollars and an American one $6.01, the currencies’ exchange rate should be the ratio of the two prices. Hence $1 should buy NT$13 [new Taiwan dollars]. In reality, it buys NT$29. The Big Mac index therefore concludes that the Taiwanese dollar is greatly undervalued against the greenback, by some 56 [percent],” explained The Economist.
In July 2025, The Economist updated the Index, comparing the price of a burger in the U.S. to the price overseas. (The price of a burger in the United States rose from $5.79 in January to $6.01 in July.) After the decline in the U.S. dollar, currencies in many Asian countries remained significantly undervalued relative to the dollar. For example, a burger costs:
- 49.8 percent less in Hong Kong than it does in the United States.
- 41.2 percent less in Japan than it does in the United States.
- 41.1 percent less in Indonesia than it does in the United States.
- 38.5 percent less in India than it does in the United States.
In contrast, a burger costs:
- 54.7 percent more in Switzerland than it does in the United States.
- 39.0 percent more in Sweden than it does in the United States.
- 36.1 percent more in the Euro than it does in the United States.
- 31.1 percent more in Britain than it does in the United States.
Overall, European countries have seen their currencies become more expensive when compared to the U.S. dollar, while currencies in China, Japan, Singapore, South Korea, Taiwan and Vietnam remain undervalued relative to the U.S. dollar. “Most are now even cheaper,” according to The Economist.
WEEKLY FOCUS – THINK ABOUT IT
“Every individual… neither intends to promote the public interest, nor knows how much he is promoting it… he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.”
― Adam Smith, Philosopher and economist
Best regards,
Waterford Advisors
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* These views are those of Carson Coaching, not the presenting Representative, the Representative’s Broker/Dealer, or Registered Investment Advisor, and should not be construed as investment advice.
* This newsletter was prepared by Carson Coaching. Carson Coaching is not affiliated with the named firm or broker/dealer.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. The volatility of indexes could be materially different from that of a client’s portfolio. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. You cannot invest directly in an index.
* Gold represents the 3:00 p.m. (London time) gold price as reported by the London Bullion Market Association and is expressed in U.S. Dollars per fine troy ounce. The source for gold data is Federal Reserve Bank of St. Louis (FRED), https://fred.stlouisfed.org/series/GOLDPMGBD228NLBM.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* The risk of loss in trading commodities and futures can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. The high degree of leverage is often obtainable in commodity trading and can work against you as well as for you. The use of leverage can lead to large losses as well as gains.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* Asset allocation does not ensure a profit or protect against a loss.
* Consult your financial professional before making any investment decision.
Sources:
https://insight.factset.com/sp-500-earnings-season-update-august-1-2025
https://www.barrons.com/articles/stock-market-earnings-data-buy-sell-f3743245?mod=hp_LEDE_C_3 or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/08-11-25-The-Stock-Market-Is-Stuck%20-%202.pdf
https://abcnews.go.com/Business/us-headed-recession-experts-weigh/story?id=124407347
https://www.bloomberg.com/news/articles/2025-08-01/us-manufacturing-contracts-at-fastest-pace-in-nine-months or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/08-11-25-US-Manufacturing-Contracts%20-%204.pdf
https://www.bloomberg.com/news/articles/2025-08-05/us-service-activity-nearly-stagnates-as-employment-contracts or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/08-11-25-US-Service-Activity%20-%205.pdf
https://global.morningstar.com/en-gb/markets/how-low-can-us-dollar-go
https://www.economist.com/interactive/big-mac-index or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/08-11-25-Our-Big-Mac-Index-Shows-How-Burger%20-%209.pdf
https://www.economist.com/finance-and-economics/2025/07/16/our-big-mac-index-will-sadden-americas-burger-lovers or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/08-11-25-Our-Big-Mac-Index-Will-Sadden%20-%2010.pdf
https://www.adamsmith.org/adam-smith-quotes