This Week in Review | Crypto Week, Q2 2025 Earnings Season, Fed Chair Developments (Jul. 18, 2025)

Transcript

Mathew White:

Hello, and welcome to This Week in Review. This weekly segment is designed to highlight a few important developments you may have missed this week, what they may mean for markets, and most importantly, the potential impact for investors. To stay up-to-date with our latest market insights, subscribe to our YouTube channel or visit fisherinvestments.com. Now, let's review what happened this week.

First, Crypto Week.

This week, Congress advanced several crypto measures aiming to establish a clearer regulatory environment and increase consumer protections. Hopes for wider adoption and acceptance of cryptocurrencies push Bitcoin's price to new all-time highs in recent days. These developments may have many investors wondering whether the cryptocurrencies should be part of their broader investment strategies. While diversification is an important principle in investing, we believe it's more valuable to blend assets with risk and return profiles that align with your long-term goals, cash flow needs and tolerance for temporary declines. Right now, Bitcoin's risk and return behavior lacks the historical data to compare it effectively with traditional asset classes like stocks and bonds. From our perspective, cryptocurrencies behave more like speculative commodities, such as gold, due to their high volatility and lack of clear fundamental drivers. Considering these assets often experience dramatic boom and bust cycles, you need skillful market timing to reliably profit. While we don't automatically rule out any investment option, we see stocks and bonds as better suited for most investors aiming to meet long-term financial objectives.

Next, Q2 2025 Earnings Season.

Second quarter earnings season picked up steam this week, with the six largest US banks reporting their Q2 results. For the Financial sector overall, early results point to resilient consumer spending and a rise in investment banking activity. However, concerns persist that ongoing tariff uncertainty could dampen lending activity in the near term. Despite this, we believe financial firms, particularly non-US banks, are well positioned to lead during this bull market. Lending and credit trends remain crucial indicators for understanding economic health, and according to May's Q2 Senior Loan Officer Opinion Surveys, slight acceleration in loan growth is anticipated in the coming months. However, recent data suggests businesses and financial institutions are still cautious due to lingering tariff uncertainties. And while we think Financials should continue to perform well in this bull market, we think non-US banks are more likely to outperform their US counterparts in the near term.

Finally, the future of the Fed Chair and Fed Independence.

You may have seen more headlines swirling this week about President Trump and Federal Reserve Chair Jerome Powell. On Wednesday, speculation suggested the president could be looking into firing Powell. But on Thursday, the president described that move as, quote, "highly unlikely". What does this mean for markets and investors? In our view, not much. First, markets hardly reacted. In fact, the S&P 500 ticked up about 0.3% by Wednesday's market close and over 0.5% on Thursday after Trump walked back his threat to remove Powell. And firing a Fed Chair isn't straightforward. Legally, the president would need "cause" to justify such a move, and policy disagreements, like differences over rate cuts, don't meet that standard. Even the Supreme Court noted recently that firing the Fed Chair without cause would likely not hold up, due to the Fed's unique structure designed to protect its independence. While some debate minor arguments around potential causes, the time and process involved in such an attempt make it highly unlikely, especially with Powell's term ending in less than a year. As Fisher Investments' Founder and Co-Chief Investment Officer, Ken Fisher, shared in his recent video—which is linked in the video description—even if a new Fed Chair steps in a bit early, the Fed's decision-making process involves an entire committee, not just one individual. This built-in structure helps monetary policy remain guided by economic objectives, not politics. The takeaway? Markets have been steady and volatility remains low, a sign that investors understand the system is built to handle these types of political rumbles. The Fed's focus on targeting both inflation and employment is safeguarded by Congress, creating checks and balances that promote stability. Remember, markets look ahead—pricing in corporate earnings and economic trends anywhere from 3- to 30- months into the future. And right now, based on our analysis, that long-term outlook remains sound.

That's it for this week!

Thanks for tuning in to This Week in Review. If you're looking for more insights, then don't miss our other series, 3 Things You Need to Know This Week, released every Monday. You can also visit fisherinvestments.com anytime for our latest thoughts on markets. Thanks again for joining us and don't forget to hit like and subscribe!