Profit Taking and Discount Shopping
We’re just five trading days into the second half of 2025, but so far this month, the average stock in the large-cap Russell 1,000 is up a solid 1.84%. If you did well in the first half of the year, however, you’re likely seeing red, while those that lagged in the first half are finally seeing some green.
The chart below highlights a sharp reversal in investor behavior so far this month, with a clear rotation out of the first-half winners and into the biggest losers. Looking at average month-to-date returns for Russell 1,000 stocks, the 20 best-performing names from the first half are down an average of 2.05%, while the top 50 and 100 from the first half are also in negative territory this month. In contrast, the worst performers from the first half are seeing a surge in buying interest: the 20 worst names are up an average of 5.41% MTD, followed by the 50 worst at 4.76%, and the 100 worst at 4.17%. This pattern reflects classic mean reversion trading, where investors rotate into beaten-down names in hopes of a rebound, while locking in profits on stocks that have already had big runs. It also suggests that investors are bottom-fishing in laggards in search for value or speculative bounce plays. Whether this is a short-term rebalancing or the start of a more sustained shift in market leadership remains to be seen, but it’s interesting that we saw similar pullbacks in first-half market leaders in July 2023 and July 2024 as well.
Of the 25 worst-performing Russell 1,000 stocks in the first half, all but one are up so far this month. On average, these stocks fell 44.7% in the first half, and they’re up 4.9% already in the first five trading days of July.
Take a look at the first-half losers below, of which you’ll likely be familiar with most.
Below are price charts of the five biggest stocks on the list of first-half losers shown above: Avantor (AVTR), Deckers Outdoor (DECK), Lululemon (LULU), Trade Desk (TTD), and UnitedHealth (UNH). All five fell off a cliff at some point in the first half, but they’re currently attempting to round out a bottom. Trade Desk (TTD) has been trying to turn things around for the longest, as it bottomed back in April and now has a rising 50-day moving average again.
Of the 25 best performers in the first half, only six are in the green so far this month: CAR, PLTR, CVNA, ATI, ALGM, and UBER. On average, these stocks, which all gained at least 50% in the first half, are down 1.3% month-to-date. None are down more than 8%, though, so the selling hasn’t been that extreme.
With earnings season on the horizon, maybe some investors are cashing in on high-beta winners to try and avoid earnings blow-ups.
Small Business Foibles
Early this morning, the NFIB published their June report on small business sentiment. We discussed some details of the report in today’s Morning Lineup, but to recap, the headline reading came in slightly lower and inline with expectations at 98.6. As we often note, this survey is politically sensitive with a bias towards Republican administrations. As such, the index surged in the wake of the election, and after pulling back significantly earlier this year, it now remains in the middle of that range, which is also lower than it was for much of the first Trump administration.
In spite of the minor change to the headline number, there were some interesting findings throughout the rest of the report. Apart from the headline index, there are parts of the report with less political sensitivity and more economic importance that are concerning. Two such areas with notable weakness were employment and capital expenditures. As shown below, the indices tracking actual changes to those areas of business have fallen sharply in recent months. For employment, current levels are at the weakest since August 2022, and the equivalent index for capital expenditures is down to the lowest reading since August 2022. While those new lows do indicate weakness, the declines could also be in part due to seasonality, with similar summer slumps for both indices observed in the past few years.
Holding the caveat of potential seasonality aside, the report offers additional insights in the form of what firms are spending their capex on. As shown below, all categories have fallen significantly in the past few months, with particularly sharp declines in June. The worst declines have been for vehicles and equipment, which are the two largest categories for capex. Vehicles—which is a tariff-impacted area—is tied with the spring of 2020 for the lowest reading of the past decade. Also worth noting is that additional building or land spending is now at a record low in data going back to early 2014.
The report also includes a look at which problems firms claim to be their most important. In another concerning data point for economic activity, 10% reported poor sales as their biggest problem in what was the highest reading for this category since March 2021. On the bright side, inflation continues to be a less important problem, as it was cited by a still high but rapidly declining 11% of respondents.
The drop in inflation as the most important problem gives room for other issues to come to the forefront. With tariff concerns front and center, it should come as no surprise that taxes are now the single biggest concern for small businesses, accounting for 19% of answers. When combined with government red tape, the 28% reading is the highest since November 2021.
As noted earlier, the NFIB historically tends to be sensitive to politics, favoiing Republican administrations. That makes the turn higher in tax and red tape concerns more surprising. Other series in the report further indicate a turn away from those political biases, though. As shown below, when it comes to reasons for positive and negative expansion outlooks, fewer firms point to politics as a good reason to expand, and more point to that as a reason for a negative outlook.
Bespoke’s Morning Lineup – 7/8/25 – Subdued
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“If your only goal is to become rich, you will never achieve it.” – John D. Rockefeller
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Subdued is the tone once again this morning as equity futures are little changed on either side of the unchanged line. Nasdaq futures are showing the biggest move with a gain of 0.25%. Crude oil is fractionally lower, just below $68 per barrel, while the 10-year yield is up 2 bp,s taking the yield back above 4.4%. Gold is slightly lower, while Bitcoin and Ethereum both are trading up about 1%.
In Asia overnight, most major indices were little changed, except for China, which was up 0.70% while Hong Kong’s Hang Seng was up just over 1%. The modest gains came even as President Trump sent letters to many countries in the region, including Japan and South Korea, informing them that their exports to the US would face tariffs of at least 25%.
European stocks are little changed in the early going this morning, with the STOXX 600 up 0.10% while Germany and the UK are up fractionally, while France is lower. The EU was one region of the world not to receive a letter on tariffs, and that has raised hopes that a deal with the bloc could be near. Reports this morning suggest that the base rate will be 10% with some exceptions for aircraft and parts, medical equipment, and spirits.
Today in the US, it’s another quiet day on the calendar. NFIB Small Business Optimism came in right in line with expectations at 98.6, which was down very slightly from last month’s reading of 98.8. The only other report on the calendar is the New York Fed’s Survey of Consumer Expectations, where 1-year inflation expectations are expected to come in at 3.2%.
With Elon Musk announcing the creation of the America Party over the weekend and the potential of a third party to hurt Republican majorities in the mid-term elections, investors headed into the new week with concerns that potential retribution from President Trump would hurt Tesla’s business. In response, the stock opened down over 6% yesterday and basically stayed there, finishing the day with a decline of nearly 7%.
Yesterday’s decline broke TSLA’s uptrend off the April lows, and that came after making a lower high in late June. All this came after the stock made a golden cross (50-day moving average cross above the 200-day moving average as both are rising) last week, which technicians consider a positive technical formation. Fitting for a stock like TSLA, the stock’s trading pattern has been sending mixed signals.
Normally, as companies become larger in terms of market cap, their share prices become less volatile, but that’s not the case with TSLA. Yesterday was the 29th daily gain or loss of 5%+ in TSLA over the last six months, which works out to 23% of all trading days. While the company went public in 2010, it wasn’t until 2020 that TSLA routinely started to see 5%+ daily moves on 20% or more of trading days over a rolling six-month period.
The Closer – Tariff Rate Tips Towards 10% – 7/7/25
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Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, we lead off with a checkup on where the effective tariff rate is sitting based on today’s announcement (page 1). We also provide a chart checkup of the S&P 500 at market cap and equal weight, the dollar, and the long bond (pages 2 and 3). We then finish with a look into the latest positioning data (page 4).
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Bespoke’s Matrix of Economic Indicators
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Bespoke’s Morning Lineup – 7/7/25 – Easing Back into Things
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“History is a guide to navigation in perilous times. History is who we are and why we are the way we are.” – David McCullough
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Investors are being eased back into the market this morning, with futures showing modest losses after a more significant decline overnight. The market may be open, but with no economic or earnings reports on the calendar, things are relatively quiet to kick off the new week. That’s generally the case for the rest of the week too, with very few reports on the calendar in the next four trading days. That will leave plenty of time for investors to focus on trade, and Treasury Secretary Scott Bessent says to expect several announcements in the next two days, and for those that don’t make a deal by August 1st, tariffs on their exports to the US will go back to the levels announced on April 2nd
The long holiday weekend is over, and it’s time for investors to get back to business as Q2 earnings season is right around the corner, and the tariff situation is likely to become more concrete. One thing bulls have going for them heading into this week is the seasonal calendar. Since WWII, the S&P 500’s median performance during the week after the July 4th holiday week has been a gain of 0.47% with positive returns 57.5% of the time. More recently, performance has been even stronger with a median gain of 1.14% and positive returns 70% of the time.
Brunch Reads – 7/6/25
Welcome to Bespoke Brunch Reads — a linkfest of some of our favorite articles over the past week. The links are mostly market-related, but there are some other interesting subjects covered as well. We hope you enjoy the food for thought as a supplement to the research we provide you during the week.
Life Is Like a Box of Chocolates: When Forrest Gump opened in theaters on July 6, 1994, no one could’ve predicted that a slow-talking Alabama man with a fondness for running would end up reshaping American pop culture. The film debuted in the middle of a blockbuster summer. The Lion King had just roared into theaters a few weeks earlier, and True Lies was waiting in the wings, but Forrest Gump carved out its own space, powered by word of mouth, critical praise, and a once-in-a-generation performance by Tom Hanks.
Audiences walked in expecting a feel-good story and left trying to unpack everything they’d just seen: Vietnam, civil rights protests, Watergate, shrimp boats, ping-pong diplomacy, and a feather that somehow made it all make sense. It struck a nerve. People laughed, cried, and immediately started quoting lines that would live on to this day: “Life is like a box of chocolates,” “Run, Forrest, run,” and even “Stupid is as stupid does.”
Forrest Gump grossed over $24 million in its opening weekend and continued to play for months. It would go on to win six Oscars, including Best Picture and Best Actor for Hanks, but on that first day, it was just another title on the marquee.
AI & Technology
Microsoft Says Its New AI System Diagnosed Patients 4 Times More Accurately Than Human Doctors (WIRED)
Microsoft built an AI system that outperformed human doctors in diagnosing complex medical cases, achieving 80% accuracy compared to their 20%, while also recommending more cost-effective tests. It works by orchestrating a group of top AI models to mimic how a panel of physicians would reason through a diagnosis, step-by-step. Experts caution that real-world clinical trials will be the true test, and that doctors in the study weren’t allowed to use any digital tools, which might’ve tilted the comparison. [Link]
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The Closer – Jobs and Wages, Claims Demographics – 7/3/25
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Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, in a recap of a busy day of economic data, we lead off with a rundown of the June payrolls report (page 1) including an update on wages (page 2). We also check in on ISM Service data and the market’s reaction to today’s releases (page 3). We close out with a look into demographic readings for jobless claims (pages 4 and 5).
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Bespoke’s Morning Lineup – 7/3/25 – Beating the Odds
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“Governments are instituted among Men, deriving their just powers from the consent of the governed.” – Declaration of Independence
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Happy Fourth! In an outcome that most would not have predicted over the last several days and weeks, the House is likely to pass the Reconciliation Bill ahead of the July 4th holiday. Just yesterday, the odds of passage by that date were less than 50%, but the bill cleared a procedural vote overnight, and Polymarket now has the odds of passage at 91%. Whatever side of the aisle you position yourself, the ability of Speaker Johnson to pass legislation over the last six months with such a slim majority has been impressive.
That’s the biggest news event of the market day so far, but there’s a jam-packed economic calendar this morning that includes Jobless Claims, Non-Farm Payrolls, Factory Orders, and ISM Services. Besides being a busy day for data, it’s also a short session as the equity market closes at 1 PM ahead of the holiday, and the bond market closes at 2 PM.
Despite the big political news and the busy day of data ahead, futures are eerily quiet as the S&P 500, Nasdaq, and Dow are all indicated to open less than 0.10% higher. Crude oil is marginally lower, gold is unchanged, and treasury yields are lower. That last point is notable; for all the talk about how the Reconciliation Bill will be a budget buster and blow out the deficit, the 10-year yield has been going down as passage of the bill has become more likely. From a longer-term perspective, too, the 10-year yield is the same now as it was on Election Day.
Heading into the July 4th holiday, the fireworks of the second quarter have put eight of the eleven sectors into overbought territory. Over the last five sessions, every sector has traded higher, and Utilities (XLU) is the only sector ETF with a gain of less than 1%. Leading the way to the upside, Materials (XLB) have rallied over 5% pushing the sector into extreme overbought territory and a gain of nearly 9% YTD.
The Closer – Gilts, Autos, Health Care Checkup – 7/2/25
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Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, we begin by looking at how UK Gilts are digesting the country’s fiscal concerns (page 1). We then check in on Tesla (TSLA) deliveries and collapse in shares of Centene (CNC) (page 2). We continue with a checkup on other Health Care stocks and the industry’s labor figures (page 3). We then finish with a review of brand level breakdowns of vehicle sales (page 4) and remittance data from Mexico (page 5).
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