CWS Market Review – July 22, 2025

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Q2 Earnings Seasons Is Looking Good So Far

The stock market closed at yet another all-time high on Tuesday. Today’s market was noteworthy because it was a “broader” rally. By that, I mean that more stocks are jumping in on the fun. It’s not just a “tech only” rally.

I like to look at the relationship between the S&P 500 High Beta ETF (SPHB) and the Low Volatility ETF (SPLV). This is an easy way to read the market’s mind.

Since the market low in April, High Beta, meaning the riskier stocks, are up more than 52% while Low Volatility is just 9%. Today, High Beta was flat while Low Vol was up 1.4%. I’d like to see more of that kind of action.

We have some early numbers for this earnings season, and it’s looking quite good. So far, 12% of companies in the S&P 500 have reported Q2 earnings. Of those, 83% have beaten earnings. That’s higher than the 5- and 10-year averages.

The S&P 500 is on track to deliver Q2 earnings growth of 5.6%. That would be the slowest growth since Q4 2023. So far, 83% of companies that have reported have beaten on revenues. Bear in mind that on Wall Street, you’re expected to beat expectations.

The S&P 500 is currently trading at 22 times forward earnings. That’s high but not unreasonable. There are, however, signs of market excess. For example, the meme stock brigades are back. Thanks to a cheering section at Reddit, shares of Opendoor Technologies (OPEN) have taken center stage. Last Monday, OPEN was traded as low as 77 cents per share. Yesterday, OPEN peaked at $4.97 per share.

Trading volume for the stock has surged from 50,000 or so each day to over 500,000,000 per day. That’s an increase of 10,000-fold in just a few days. I think I have a feeling for how this will end.

Now Kohl’s’s (KSS) has been picked up by the day-trading frenzy. I’m not sure how long this will last. About half of Kohl’s outstanding shares available for trading are shorted. At one point today, the stock was up more than 100%. By the closing bell, KSS settled for a gain of 37%. (It’s just a department store!)

Truthfully, these meme stocks are closer to gambling than true investing. They certainly can be fun games to play, but it really helps if you’re the first one out the door.

There were several prominent earnings reports today. GM (GM) beat earnings and reiterated its guidance but the stock fell 8% after the carmaker said that it’s concerned about tariffs hurting sales. GM’s core profit fell 31.6% to $3.04 billion.

Sherwin-Williams (SHW), a former Buy List stock, had a disappointing earnings report. For Q2, the paint people made $3.38 per share. That was 42 cents below expectations. The stock reversed its earlier losses and only closed down modestly.

Shares of Northrop Grumman (NOC) reached a new high. The stock was up over 9% today. The company raised its guidance.

Labcorp (LH) also got a nice 3.7% lift today. Philip Morris (PM) missed its revenue estimates and the shares got dinged 8.4% today. The stock yields close to 3%. Mettler-Toledo (MTD) also had a good day.

There are going to be a lot more earnings reports this week.

How the Market Behaves at a New High

The S&P 500 hit another all-time high yesterday. This week, I wanted to take a closer look at how the stock market has historically behaved when it’s at an all-time high. Perhaps counterintuitively, the stock market has done quite well off its all-time high. You might be inclined to think that the all-time high is the worst time, but the evidence says otherwise.

I took all the S&P 500 daily closes going back to 1960. Since then, there have been about 16,500 trading days. Of those, the index hit an all-time high on nearly 1,200 days or about 7.3% of the time.

The day following an all-time high close, the stock market has gained a total of 75%. Annualized, that works out to 12.8%. The rest of the time, when the market’s not at an all-time high, the annualized gain is just 7%. That’s quite a big difference.

From my experience, the worst market days don’t come off peaks. Instead, the market gradually crumbles off its peak, and then the big drop happens.

I also found that even if the S&P 500 closes within 10% of a new high, but not at a new high, then the market averages an annualized gain of 7.9%.

As well as the stock market has done when it’s at a new high, what’s also impressive is how stable the market has been at all-time highs. Since 1960, there have been only three times when the market has gained more than 2% in a single day off an all-time high. Interestingly, all three came in the 1990s.

Coming off an all-time high, the market has gained more than 1% only 5.4% of the time. Normally, 1% up days come more than 7.2% of the time. The lesson is that calm markets tend to be good markets, and markets that are rising tend to keep on rising.

Too often, investors feel that strong markets have given them unwarranted gains and that they have to sell out before the correction comes. The problem is that you never know when it will come. Just look at this year when we had a nasty drop followed by a pretty impressive rally.

Peter Lynch famously said, “Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in the corrections themselves.”

This is another example that good investing really comes down to patience.

Mueller Industries Delivers Solid Earnings

This morning, we got a nice earnings report from Mueller Industries (MLI), which is one of our Buy List stocks. I like Mueller a lot. It’s a well-run mid-cap that’s largely overlooked by Wall Street.

I’m always surprised at how Wall Street can completely ignore such good businesses. Only one analyst follows MLI despite it being a big winner for many years and having a market value of $10 billion. Since early 1992, the stock is up by 40,000%.

So what does Mueller do? The company makes and sells copper, brass, and aluminum products. The company operates through three segments: Piping Systems, Industrial Metals, and Climate. You may have noticed that copper prices are soaring and much of the reason is our tariff policy.

After some adjustments, MLI’s Q2 net income was $1.96 per share. That’s compared with $1.41 per share for the same quarter one year ago. The lone analyst had been expecting Q2 earnings of $1.62 per share. Mueller’s net cash generated from operations was $190.6 million. MLI’s cash balance net of debt was $1 billion at quarter end, and the current ratio is strong at 4.9 to 1.

CEO Greg Christopher, said, “Excluding the recovery reported thus far on our tornado related insurance claim, we delivered a record quarter. Tremendous credit goes to our manufacturing operations and commercial teams for their outstanding execution and focus amidst complex market conditions. We are particularly pleased to see the positive progress and contributions made by Nehring and EPC, our 2024 acquisitions, and look forward to their continued improvement.”

If business continues to go well at Mueller, then I think the company can earn $6 per share this year and perhaps $6.50 per share next year. If that’s correct, then the company is attractively valued. Over the last five weeks, the shares are up 18%.

The Federal Reserve meets again next week. Don’t expect any change to interest rates this time, but the odds of a rate cut before the end of the year are high. Also, the Q2 GDP report will be out on Wednesday which is the same as the Fed policy statement. That’s all for now. I’ll have more for you in the next issue of CWS Market Review.

– Eddy

P.S. I’m currently reading “The Wealth Ladder: Proven Strategies for Every Step of Your Financial Life” by Nick Maggiulli. In the book, Nick systematically breaks down how to build wealth. It’s one of those books where I find myself nodding along with each page. Check it out.

Posted by on July 22nd, 2025 at 8:02 pm


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.