Market Flash | Affinity Capital

March 10, 2025

Quite a day in the markets. 

 

Starting two weeks ago, we have sold several tech-heavy positions in all client portfolios. We have also maintained much higher-than-normal cash levels in all client accounts in anticipation of increased volatility. We believe the portfolio management decision to keep so much “dry powder” in our portfolios will prove beneficial. 

 

We have felt the markets and especially the “Magnificent Seven Tech Stocks” were somewhat overvalued even before the election. Keep in mind the markets have seen record highs in just the last few months and a good flushing of the pipes is not necessarily a bad thing. What we watch for are clues to whether the short-term market is just correcting or whether the integrity of the market dynamic is shifting in a mid / long term way. We are looking at rebalancing alternatives and uses for cash … but … we do not want to be out of position for a rebound. With this in mind, we will need to work through volatility, rebalance and maintain our focus as long-term investors

 

Our view on the major market Indices:

  • The tech-heavy Nasdaq will likely see another 5% to 9% downside.
  • The Dow Jones Industrial Average has reached a support level. While we would like to see it hold here, the next drop could be another 4.5% to 5 %. For perspective that would be in the area of another 2000 points to the downside – which sounds a bit scarier than 5%
  • The S&P 500 may see another 5% to the downside.

Following these types of selloffs, the market can bounce strongly and then may go back down to “test” the previous lows. As mentioned above, we need to work through volatility and maintain our focus as long-term investors.

 

What is driving the markets?

  1. We look for the “Tariff Volatility” to be priced into the market by the end of 2nd quarter. Good or bad is a separate issue. It is the fear of the unknown that drives volatility.
  2. We see the tax bill in congress as an overall positive for the markets. That unknown should have clarity by the end of the 2nd quarter as well. 
  3. Another congressional Continuing Resolution to stave off a government shutdown is an added market driver although historically, these have not caused much economic stress. The timing, however, is compounding the market volatility.
  4. Two huge tech giants started the ball rolling downhill. Nvidia announced a massive earnings beat, an increase to its dividend, and reported a 262% surge in year-over-year revenues and Wall Street is worried they cannot do better going forward. Tesla with the “Elon factor” and reduced government investment in electric cars is pushing Tesla down. NVIDIA will find a bottom and continue to be a market leader – Tesla, not so sure. Wait and see. The rest of big tech is caught in the undercurrent but remain very healthy companies.
  5. Recession signals are starting to flash brighter although the bond market has been waving a red flag for quite a long time now. Plus, the recent weak economic data does not yet reflect the government workers and contractors that may be driving unemployment numbers going forward while recognizing that government job creation has favored employment data in recent years. We do note that markets can still perform well during a recession. Stagflation is a bigger concern but that is a more involved discussion.
  6. We will defer comment on the multitude of other hopefully, (hope is not a strategy but I will use the term just this once), temporary headwinds of market, policy, and political dramas. … We live in interesting times!

Please feel free to call. We appreciate the opportunity to serve you.

 

Signals from the Fed: Inflation, Growth, and What Comes Next

August 22, 2025
It was a Fed-heavy week, with three major developments that matter for markets and the economy. FOMC minutes (July 29–30) — released Wednesday (Aug. 20). The minutes reinforced a data-dependent stance : participants saw continued progress on inflation but noted that risks aren’t one-way, citing pockets of labor-market cooling and the growth impact of tighter financial conditions. Policymakers emphasized flexibility and the need to see inflation moving durably toward 2% before declaring victory. For investors, the takeaway is that the bar for rapid policy shifts remains high, but the Committee is clearly keeping both sides of the mandate in view. Weekly balance sheet (H.4.1) — released Thursday (Aug. 21). The Fed’s weekly statement showed the usual moving pieces: securities holdings, reserve balances, and program usage. While week-to-week changes can be noisy, the release remains a useful pulse on system liquidity and the runoff of the Fed’s portfolio under quantitative tightening . Markets watch aggregate reserves and Treasury General Account flows because they can nudge front-end rates and funding conditions at the margin. Jackson Hole — Chair Powell’s Friday address. At the Kansas City Fed’s annual symposium, Chair Powell underscored that policy decisions will continue to be guided by incoming data . He highlighted the balance between sustaining expansion and finishing the job on inflation , noting tariff-related price pressures and supply-chain considerations among factors being monitored. The message: no preset path, but openness to adjust as evidence accumulates. Historically, Jackson Hole is more about long-term framework and risk management than near-term moves, and that tone held this year. What it means for the days ahead Near-term market drivers will be how inflation and labor data align with the Fed’s “proceed carefully” posture. • If inflation continues to edge lower while growth holds steady, the door stays open to gradual policy easing later this year. • If price pressures re-accelerate—or if hiring slows more sharply than expected—the Fed may extend its wait-and-see approach. Liquidity dynamics from the Fed’s balance sheet runoff will remain a background factor , but the central story is still inflation’s glide path and the durability of demand . Investors should expect choppy trading around key data releases , with markets pricing probabilities rather than certainties. As always, we welcome your questions and are here to support you . At the heart of everything we do is our commitment to “ Wealth Management for Life ”—providing enduring guidance for you and your family’s financial success.

Fed Moves and Market Trends | Affinity Capital

August 6, 2025
Markets entered the week with a boost of optimism, fueled by softer labor data and growing chatter that the Federal Reserve might be leaning toward a rate cut this fall. But that optimism didn’t last long . As the week unfolded, economic uncertainty returned to center stage: fresh concerns about tariffs, underwhelming corporate earnings in some sectors, and signs of consumer fatigue in key parts of the economy tempered the early enthusiasm.

Weekly Market Update: Stability Amid Data and Tariff Jitters | Affinity Capital

July 17, 2025
This week’s stock markets were marked by tight trading ranges, record-setting highs in tech, and a backdrop of macro uncertainty. The S&P 500 (through SPY), Nasdaq (QQQ), and Dow (DIA) eked out modest gains, shrugging off headline volatility tied to Fed independence concerns and escalating tariff threats.