Investors are demanding the next blockbuster as stocks continue pricing in perfection.
After the market’s close Thursday, the streaming juggernaut Netflix reported revenue growth of 13% year-over-year alongside gains in membership, pricing and advertising. They repurchased a record $4.7 billion of stock in the quarter. But shares fell, as investors longed for something more.
What’s missing?
Stranger Things. K-Pop Demon Hunters. Bridgerton. Squid Game.
Without a new breakout hit like these in the pipeline, anxiety is building over whether the juice is worth the squeeze, to put it mildly, with valuations at these lofty levels. Today it is Netflix and semiconductor stocks, earlier in the week it was IBM, and tomorrow it may be … name nearly any one of the other 498 stocks in the S&P 500 Index.
Against this backdrop, economic data was reassuring, reflecting a reprieve from the height of the Iran war, not that much has improved there. But what has improved is inflation, albeit mildly. The Consumer Price Index (CPI) fell -0.4% in June, marking the first monthly drop since May 2020. Year-over-year, consumer prices rose 3.5% in June, also less than the 3.8% gain expected and marking the smallest annual increase since March. Energy costs dropped -5.7% following a 3.9% rise the month prior, while food prices rose 0.2% following a similar increase in May.
Producer prices showed the same dynamic: they saw “only” a 5.5% year-over-year rise in June, less than the 6.2% expected increase.
While still at dangerously elevated levels, the relative improvement in prices–at least in the headlines–strengthens the argument that price pressures are cooling as the lingering impact from tariffs falls off and energy prices ease amid tentative and delicate, but still ongoing, U.S. and Iran peace negotiations. That “good” news is being supplemented this morning by data releases showing an improvement in consumer confidence and construction activity.
For the Fed, with a growing divide among Committee members between those increasingly concerned about further upside risks to inflation and those optimistic that the brunt of the pain may now be behind us, policy is likely to remain unchanged. As in politics, conflict often begets gridlock.
Turning to politics, it was notable that President Trump spoke last evening about election security, with midterms looming. Trump pointed at Chinese interference, perhaps at the risk of inflaming geopolitical tensions, even with President Xi Jinping’s historic planned visit upcoming this fall and a more recent uneasy calm in relations.
What does this mean for your investment plans?
We have been bracing for some of this volatility since the beginning of 2026 and always plan for market cycles in our advisement over your funds. Diversification of your investment allocation to stocks, across geographies and market capitalization, is one key lever we typically structurally embed in your planning as we holistically consider your investments. Considering concentrations in your personal portfolio as well as those now structurally embedded in the general market has been another focal point for us. Having a financial plan that focuses on cash flow analysis, and planning intentionally for liquidity, is another important way we prepare for market gyrations.
The good news here for financial markets and for you is that fundamentals are intact. There is no crisis in that–companies and many consumers are managing expertly through the post-COVID period with prudence and not paralysis despite the shocks of inflation, tariffs, war and political polarization. The market getting ahead of itself on valuations is less of a problem than a broken fundamentals story. AI irrational exuberance does not mean that there isn’t a transformational moment occurring, it is just finding the right tonality for how it should be weighed and measured by the financial markets.
I have always loved the quote from John Maynard Keynes that “markets can remain irrational longer than you can remain solvent” as a framework for understanding that our work together is not about knowing what the market will do and when, but figuring out what you need and when. And working hard to keep that pipeline strong of recommendations in all areas of your goals–tax, estate, financial planning and investments, too–so unlike Netflix, there is no drought of captivating opportunities to focus on. Thank you for your interest in our weekly investment commentary. If you would like to speak personally with a member of our team at any time, please click here.
Written by a human.