9/1/2025 Market Note

MARKET NOTE:

Taking a step back, the market run since 2023 (after the 2022 bear market in stocks and bonds) has been extraordinary. The biggest companies, particularly the so called Mag 7 or Magnificent 7, are large American tech companies generating outsized growth and profits, and are largely responsible for the overall market’s strong performance. They are some of the biggest investors in artificial intelligence supporting broad productivity across the economy and strong demand for capital expenditures. A market cap weighted portfolio has generated large returns since 2023, because a market weighted portfolio has considerable exposure to these great American companies.

When it comes to investing in the market, rarely is there perfect clarity around future outcomes, although some may be more probable than others. There is almost always a mixed bag of data to work through. That is why investors who a) understand the cyclicality of the market, b) who are aware the normal human biases when it comes to investing (the field known as behavioral economics), c) who are able to think longer term and d) act strategically, do better than other investors.

As to that mixed bag, let’s review where we stand at the moment providing some of the various bullish and bearish indicators. While the market has had strong performance going back to 2023, as it sits on 9/1/2025, current investor sentiment is bullish but not overly euphoric. That suggests the potential for more upside.

Also, while positioning is not as underweight as it was before, it is not considerably overweight and it is closer to neutral. That also suggests there is potential for more upside.

However, there is no denying valuations are very high, but valuation is rarely a great tool for market timing because as John Meynerd Keynes wrote, the markets can stay irrational longer than you can stay solvent. That is another reason for taking the broader view when it comes to investing.

From an economic perspective, we are in a decelerating nominal GDP environment. The labor market is weakening. Being able to parse that is difficult at the moment because economists have to decide how much of the labor market weakness is due to lack of demand and how much of that has to do with decreasing supply of labor associated with reduced levels of immigration.

One of the research firms we quote frequently (Hedgeye Risk Management) wrote on 8/20/2025 the following: “Despite clickbait panic, broad market internals remain strong, with most U.S. stocks, sectors, credit, and international positions showing gains.”

Volatility measures are having lower highs and lower lows. The market is making a series of higher lows and higher highs. Hedgeye uses a quantitative signaling process that (among other things) looks to see whether growth will be increasing or decreasing and whether inflation will be increasing or decreasing. They are expecting a Quad 2 environment (accelerating growth and inflation) which is a positive environment for equities. As the signals that feed into their signaling process change, so will their expectations for growth and inflation, but for now, that is where we stand.

To learn more about Meridian's market views and how they are incorporated into investment portfolios, reach out to us to schedule an introductory phone call at (843) 212-6828 or contact@meridianria.com.

About Joshua

Joshua Henry is the founder and Managing Principal of Meridian Financial Advisory (meridianria.com), an independent, fee-based wealth management company located in South Carolina, serving people locally and across the country, that focuses on providing wealth management solutions primarily to affluent individuals over age 50 and their families. Joshua is passionate about helping people have a better life by designing and implementing customized financial plans that bring clarity and confidence. Joshua is a CERTIFIED FINANCIAL PLANNER™(CFP®), a Certified Investment Management Analyst® (CIMA®) Professional, and earned a Bachelor of Arts degree in Political Science from Cedarville University and a Master of Business Administration degree with a concentration in Corporate Finance from Salve Regina University. The courses for the Corporate Finance concentration were taken from the Kelley School of Business at Indiana University. He has held workshops on Social Security Claiming Strategies, IRA Planning, and Career Coaching for Executives in between jobs. Josh has also taught finance at the university level. When he’s not working, Josh teaches adult Sunday School at his church in Pawley Island, SC. He enjoys traveling, reading, working out and time with his family. To learn more about Josh, connect with him on LinkedIn