It’s been an interesting summer, both personally and professionally and I’m writing to vent some things now top of mind, in no particular order.
· Tuesday July 8th was a day I’ll never forget. My wife and life partner, Carrie, was stricken with a ruptured brain aneurysm - and lived to tell about it. Remarkably, she’s on a path to full recovery with no residual physical or mental deficits, which is most unusual.
Carrie’s at home now and steadily returning to normal. Kudos to the medical teams at UPMC York and Harrisburg for saving her life and repairing her brain so well.
The key lesson I’d share from the experience is to not ignore a sudden, severe headache that lingers — it may signal brain stress. Also make sure your health care power of attorney documents are up-to-date; I nearly had to use mine.
We cashed in all of our good luck chips this month - and we’re grateful we had them.
· This is the time of year in which I typically stick my neck out with an investment outlook. Not this summer. Trump 2.0 has upended nearly all economic policy norms, which render an outlook more guesswork than guidance.
· Beyond Trump, the past five-plus years have been among the most chaotic in U.S. capital market history: pandemic, crisis stimulus, meme stocks, war, inflation, whiplash partisan policies, AI, deficits, now tariffs and a landmark new law that includes everything but the kitchen sink. Offering a mid-year outlooks feels like a futile exercise at the moment.
· If the swirling new tariff regime is finalized soon, businesses will at least gain some clarity. Inflation would likely experience a one-time jolt — impactful, but perhaps manageable. But if the trade brinkmanship continues indefinitely, especially with China, inflation could become embedded, keeping interest rates higher for longer. There’s more to unfold, even as trade “deals” are cut as I type.
· Undermining the Fed Reserve’s independence — like forcing out the chairman — would shake global confidence in the U.S. dollar Ironically, if the Fed cuts rates under political pressure, it would likely raise longer dated interest rates as bond investors object, the opposite of Trump’s goal.
· Further complicating the investment landscape is the new complex BBB legislation. One side will be grievously wrong about its projected impact on the US economy and future budget deficits.
· We’re taking a wait-and-see approach, perplexed about the net impact on the economy from all the moving pieces in the bill and focused on how future tariff revenue could narrow federal budget deficits, thus muffling higher interest rate concerns. Got that?
· The U.S. dollar is already having a rough 2025 — its worst year since 1971, the year it was removed from the gold standard. A falling dollar drives up import inflation but helps exports. If the greenback decline endures, international equities will become even more attractive. Foreign stocks are already up about 20% in 2025, mostly due to foreign currency tailwinds.
· We’re fully on board with the transformative power of generative AI and the profound ways it’s beginning to reshape daily life and the broader economy.
· On a personal note, I’m convinced that ChatGPT helped save Carrie’s life on July 8th. That morning, out of concern, I entered her symptoms and was advised to seek immediate medical care. It correctly predicted her diagnosis - a subarachnoid hemorrhage (ruptured aneurysm). I shudder to think the outcome if we had not acted in time.
· AI will be disruptive – there will be economic winners and losers and it’s too early to divine where capital will be best deployed. Digital infrastructure - including data centers - and power generation /transmission seem like logical places to start.
· We suspect that AI-related productivity benefits will start to appear in corporate earnings forecasts for 2027 – after the tariff smoke clears. We’re bullish on the broader impact of AI on stocks outside of mega-tech hyper-scalers.
· The Shiller CAPE ratio — which adjusts SP500 index corporate earnings over a rolling decade — is now at the second-highest level in history. Only 1999 was higher. That’s a waving red flag for large-cap tech stocks. A 2000-style tech bear market isn’t off the table and we’re watching for signs.
· After a brutal stretch since 2022, commercial real estate has bottomed — even the office sector. A halt in new construction is finally soaking up excess supply across many sectors. If interest rates were to decline, real estate could leap to a portfolio leadership role in 2026-2027.
· As for energy, oil is un-investable right now due to myriad geopolitical risks. Natural gas remains the essential bridge to viable renewables and nuclear energy; AI workloads won’t be powered by subsidized wind farms. We remain bullish on LNG investments – helped by the Russian natural gas boycott.
· A few words on credit. Given the cross currents, the bellwether ten-year Treasury yield, now trading in the mid four-percent range, feels like an equilibrium level given all the macro cross-currents.
If slow-motion tariffs, the falling dollar and rising fiscal deficits don’t create an uptick an inflation – a big "if" – then medium-term investment grade bonds look attractive at current yields.
Still, there’s too much interest rate risk to justify high-conviction credit bets right now, investment grade, private, high yield or otherwise. With short-term credit instruments still yielding over five-percent, we’re content to wait for more clarity before taking on more credit risk.
We still have an infatuation with muni bonds due to their undervaluation.
· Venture capital is interesting again. 2022 inflicted heavy damage across capital markets, but none worse than VC. IPO activity since 2021 has been the worst in modern history. New IPO volume is showing signs of life in 2025 with several successful listings. Pundits think the thaw is real, especially with Trump’s new de-regulation regime. We’re intrigued by this space.
· To close, we’ve been watching a lot of streaming over the past few weeks. A few winners to share: Mare of Easttown (HBO), Billy Joel biopic (HBO) and the Titan submersible disaster (NetFlix).
Until next time, stay cool and be well…Tim