After a Wild First Half of 2025, Your Ticket to Second-Half Profits Starts Now VIEW IN BROWSER “May you live in interesting times.” The phrase is often cited as an ancient Chinese curse. The kind of thing you’d ironically say to someone you dislike. But the real irony is that we have no record of it ever being a common turn of phrase in Chinese. Either way, it sure applies today – in fact, something big is happening in a couple weeks (more on that in a moment). And if you’re serious about making money in the markets, you’ll want to be ready for it. Because let’s face it – the first half of 2025 hasn’t exactly been smooth sailing. With all of the distractions and uncertainty, it’s no wonder that the stock market took investors on one heck of a rollercoaster ride in the first six months of the year. But as you can see in the chart below, the stock market staged an incredible recovery in late April, May and through the end of June.  In fact, the S&P 500 and NASDAQ both broke through to new all-time highs before June ended. So, what should we expect for the rest of this year? Will this rally keep going? I’ll address both of those things in today’s Market 360. But make no mistake – the real story is happening behind the scenes... As I explained in a special briefing this past Wednesday, a historic shift is unfolding, thanks to Executive Order (EO) #14179, signed by President Trump. To put it simply, this set in motion a plan for American AI dominance. And investors need to be aware of what’s going on, because it could ignite a tiny corner of the market that could hand early investors some of the biggest gains of the AI era. You can catch all the details by watching the rebroadcast of my briefing here. But first, let’s review the highlights in the first half of the year, month by month. What's Happened So Far January – Donald Trump was sworn in as the 47th president of the U.S. and started his second term. In other news, DeepSeek claimed its AI models were more efficient and cheaper, which rocked Wall Street and triggered a massive selloff in AI, utilities and electrical infrastructure stocks. February – President Trump announced 25% tariffs on Canada and Mexico, the U.S.’s two biggest trading partners. Fourth-quarter 2024 earnings were impressive, with the S&P 500 achieving 17.8% average earnings growth. March – President Trump imposed the 25% tariffs on Canada and Mexico, as well as doubled tariffs on China to 20%. “Tit-for-tat” tariffs got underway, and investors worried tariffs would spark inflation and hinder economic growth. As a result, the S&P 500 fell into correction territory, and all the major indices were deeply oversold. April – The so-called “Liberation Day” introduced reciprocal tariffs across the board, with at least 10% tariffs imposed on all of the U.S.’s trading partners. But in a surprising about-face, President Trump provided a 90-day pause on tariffs in order for trade talks to take place. China was the exception, as tariffs were increased to 145%. May – The Federal Reserve continued to defy President Trump and Treasury Secretary Scott Bessent, holding rates steady despite positive inflation data and solid economic growth. The S&P 500’s earnings growth remained robust in the first quarter, with 12.9% average earnings growth. The first quarter marked the second-straight quarter that the S&P 500 achieved double-digit earnings growth. June – The U.S. entered the 12-Day conflict between Israel and Iran, with a surprise attack on three of Iran’s nuclear facilities. A fragile ceasefire ensued. The U.S. and China also signed a trade deal that included rare earth minerals. What to Expect for the Rest of the Year So, what can we expect in the second half of the year? Well, if you’re a longtime reader, then you know that I hate the month of August. Typically, Wall Street and Europe jet off on their summer vacations in August, leaving the stock market susceptible to light trading volume, wild swings and unscrupulous short sellers. And September is historically the weakest month of the year. But we have July to get through first, and it could be a positive month for a few reasons… First, the second-quarter earnings announcement season will kick off in a couple of weeks. FactSet currently estimates that the S&P 500 will achieve 5% average earnings growth in the second quarter. That’s down from previous estimates for 9.4% at the start of the second quarter. But it’s not unusual for this number to be revised higher following wave after wave of positive earnings surprises. Second, Trump extended the tariff deadline to August 1, and we’ll know more about which countries have negotiated new trade deals with the U.S. by then. There is no doubt that the tariffs the Trump administration is imposing are controversial. But the countries that cooperate with the U.S., like the U.K. and Australia, are only being hit with 10% baseline tariffs, and they should be largely offset by the appreciation of the U.S. dollar in the upcoming months. Canada also recently rescinded its Digital Services Tax in order to avoid any delay negotiating tariffs with the U.S. The two countries aim to wrap up negotiations by July 27. The tariffs on Vietnam were finalized at 20% on exports to the U.S. and 40% on Chinese products sub-assembled in Vietnam. Other countries, though, face higher reciprocal tariffs if they have their trade barriers and do not agree to buy U.S. energy or other exports. The European Union (EU), in particular, has been difficult to deal with, as it has trade barriers for 27 countries. It will be interesting to see how many countries reduce their tariffs to secure a better trade deal with the U.S., but I remain in the camp that there will be freer trade with fewer tariffs when all the dust settles. And finally, the Fed will hold its next Federal Open Market Committee (FOMC) meeting this month, and there is growing pressure to cut key interest rates finally. The latest FOMC “dot plot” forecasts two potential 0.25% key interest rate cuts this year. However, seven FOMC members don’t expect any rate cuts in 2025. Clearly, there are still some hawks included in the 19-member FOMC. But in a turn of events, Fed Chair Jerome Powell recently said at a European Central Bank forum in Portugal that regarding the next interest rate decision, “it will depend on the inflation data.” That’s a huge deal, folks, because the Fed has ignored the inflation data so far. Inflation has come in well below economists’ expectations. And the Fed can no longer ignore the fact that the “inflation bogeyman” that’s haunting them has failed to materialize. The Next AI Phase Is About to Begin... The bottom line of all this is that we should continue to see positive earnings growth, freer trade will come as a result of the tariffs and a rate cut is coming soon. All of these things have the potential to extend the rally. As we wait for these things to happen, it’s essential to keep your portfolio well-positioned for what’s about to happen next. But the biggest catalyst of the second half of the year is coming straight from the White House… and it could spark a fire under a group of certain stocks. (Hint: They’re NOT AI stocks.) You see, back in January, President Trump signed EO #14179. Why? Because America was losing its lead in the AI race. The Trump administration knows this. Silicon Valley knows it too, which is why they’re teaming up with Trump. As a result, the White House is on a warpath to secure the materials and systems AI needs to scale. Right now, we depend heavily on foreign countries – especially China – for the physical inputs that power AI. That includes everything from rare components in data centers to essential technology in robotics, automation and energy systems. EO #14179 was written to fix that. It’s meant to fast-track domestic development, reduce our dependence on adversaries and ensure that America stays at the front of the AI Revolution. Most people aren’t even paying attention to this. But that could change very quickly, and I want you to hear about it before everyone else. That’s why, this past Wednesday, I held what may be the most important briefing of the year. It’s called Trump’s AI Day – and if you want to make money in this next phase of the AI Boom, you need to catch the replay. Click here watch the replay now. Sincerely, | .png)
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