👉 Markets Ripped Higher, Here's Why:

Together with XFunds

👉 Week in Review — Too Long; Didn’t Read:

Key Earnings Announcements:

• Palo Alto Networks became the first cybersecurity firm to surpass $10B revenue run rate

• Target’s operating margins compressed due to tariffs

• Walmart reported a rare miss on profits

Major Economic Events:

• Jerome Powell is ditching his “low inflation” efforts and now optimizing for low unemployment — here’s what to do…

Happy Sunday.

Before we get started, we wanted to offer a warm welcome to the +412 new subscribers who joined us this week, and the 2,615 of you who have joined us thus far in August!

In case you’re new around here, I’m Austin Hankwitz — I’ve been publishing earnings analysis on publicly-traded companies for over half a decade. My podcast, Rich Habits, has hit #1 on Spotify’s Business Podcast chart four times since it’s inception only two years ago.

At the start of 2023, I began my journey of building a $2M Dividend Growth Portfolio from scratch. This twice-weekly newsletter is how I keep you all updated on my progress.

For me, early retirement means $2M invested. For you, it might mean something else. Regardless of your early-retirement number — I hope these weekly synopses of my portfolio progress + what’s been happening in the markets helps you on your own journey.

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👉 Portfolio Updates (YTD Performance):

After Jerome Powell took the stage at Jackson Hole and announced his plans to cut interest rates and loosen monetary policy, the markets ripped higher — sending names in the portfolio like Oscar Health, SoFi Technologies, and Rocket Lab up high-single digits.

The “Long Risky” subsection of the portfolio (high-octane growth stocks I’m long-term bullish on) is now up more than +26% year-to-date, and hopefully crosses the +30% threshold very soon.

Total performance year-to-date of the stock-only portfolio is +13.4%, compared to the S&P 500’s +10.0% and the Nasdaq-100’s 12.1%.

The “Monthly Income” section of the stock-only portfolio is up around double-digits as well — couldn’t be happier with NEOS Funds’ performance this year.

The cryptocurrency portfolio continues to climb higher. Bitcoin is up double-digits, while Ethereum (a $120K total position in the portfolio across various accounts) is up +43% year-to-date. As you all might remember, I “washed” my ETH position a few months back around $1,560 / ETH — which is why my position now reflects a +206% return as shown below.

I’m very optimistic cryptocurrencies in general will continue to trend higher over the coming months. I hope to see ETH hit $6-7K during that time.

No real changes to share — simply dollar cost averaging into the portfolio and trusting the process.

👉 Key Earnings Announcements:

Palo Alto Networks became the first cybersecurity firm to surpass $10B revenue run rate, Target’s operating margins compressed due to tariffs, and Walmart reported a rare miss on profits.

• Palo Alto Networks (PANW)

Key Metrics

Revenue: $2.5 billion, an increase of +16% YoY

Operating Income: $497.2 million, an increase of +108% YoY

Profits: $253.8 million, compared to $357.7 million last year

Earnings Release Callout

“Our strong execution in Q4 reflects a fundamental market shift in which customers understand that a fragmented defense is no defense at all against modern threats. They are partnering with us because our platforms are designed to work in concert, creating powerful operational synergies that deliver superior, near real-time outcomes and the efficiency our customers need.

We exited fiscal year 2025 with an acceleration in RPO, and surpassed the $10 billion revenue run-rate milestone, positioning ourselves well for sustained growth ahead."

My Takeaway

• Target (TGT)

Key Metrics

Revenue: $25.2 billion, compared to $25.4 billion last year

Operating Income: $1.3 billion, compared to $1.6 billion last year

Profits: $935.0 million, compared to $1.2 billion last year

Earnings Release Callout

“Today, we also reported our second quarter earnings, which showed encouraging signs of recovery, including improved traffic and sales trends — particularly in our stores — and disciplined cost management in a challenging retail environment. As we enter the critical back-to-school and holiday seasons, our team remains focused on consistent execution and building momentum as we look ahead to the new year."

My Takeaway

• Walmart (WMT)

Key Metrics

Revenue: $177.4 billion, an increase of +5% YoY

Operating Income: $7.3 billion, compared to $7.9 billion last year

Profits: $7.0 billion, an increase of +56% YoY

Earnings Release Callout

“The top-line momentum we have in our business comes from how we’re innovating and executing. Connecting with our customers and members through digital experiences is helping to drive our business, and the way we’re deploying AI will make these experiences even better. We’re people-led and tech-powered, and I love how our associates continue to drive change and results for our company.”

My Takeaway

👉 Major Economic Events:

Jerome Powell is ditching his “low inflation” efforts and now optimizing for low unemployment — here’s what to do…

• Jerome Powell in Jackson Hole

Instead of our usual breakdown of all things investor events, global affairs, and major economic events — we thought you all would instead prefer a detailed breakdown of Jerome Powell’s speech on Friday and what it means for your money.

Jerome Powell delivered an important speech at the Jackson Hole symposium on Friday, signaling a subtle yet very meaningful policy shift. He acknowledged growing downside risks to employment — particularly citing the stark drop in job growth (down to +35,000 jobs per month from +168,000 last year) and a slow labor-force uptick tied to decreased immigration. While inflation remains somewhat elevated, Powell framed much of the tariff-related pressure on inflation as transitory, suggesting it might represent a one-time jump rather than sustained inflationary momentum.

In my opinion, the most important takeaway from the event was his move away from the “average inflation targeting” framework adopted in 2020 and re-adopted a more conventional, flexible inflation targeting strategy. This pivot, in my opinion, is Jerome saying “I can’t control what the sitting President does to negatively impact inflation i.e. tariffs.” Therefore, he’s instead focusing on what he can control — employment.

Powell left the door open for a possible rate cut as early as September — not entirely committing, but suggesting that the shifting balance of labor-market weakness and inflation risks could make a cut justified. He also emphasized the Fed’s commitment to data-dependent policymaking and reaffirmed its independence from political pressures.

✅ What It Means For The Stock Market

Powell’s remarks were interpreted as dovish, and the markets responded accordingly. A potential interest rate cut lowers borrowing costs — the cheaper it is to borrow money the easier it is to spend more money. More money spent = more corporate profits — and the markets immediately priced those profits into stock prices on Friday.

The speech set the tone for renewed liquidity, encouraging investors to move back into equities despite mounting economic stress and chatter of an “AI bubble.”

✅ Why This Is Important For Us Investors

Let’s take a step back and define exactly what the job of the Federal Reserve is — to balance low inflation with low unemployment.

That’s it!

Since 2021, the Fed has been laser-focused on the inflation side of that equation. This was evidenced by their action of hiking interest rates at the fastest pace in over 40 years (shown below).

But now the Fed is instead focused on optimizing for low unemployment vs. low inflation — which is confirmation, in my opinion, that rate cuts are coming.

Year-to-date, -461,000 jobs have been revised down — certainly a reason to flip-flop on this dual mandate.

I’m also of the belief that inflation is going to rebound higher because of these rate cuts. This is terrible new for lower and middle-class Americans as inflation is essentially an additional tax on those individuals. For the upper class and wealthy (majority of the asset owners in this country), this can be a very good thing.

When the Fed cuts rates within 2% of all time highs, which we’re at right now, the S&P 500 loves it.

In 20 of the last 20 times this has happened the S&P 500 has responded positively, with an average return of +13.9% over the following 12 months. 

Asset owners are about to be handsomely rewarded.

Additionally, the “relief” in home prices Americans are waiting for likely won’t come.

Mortgage rates will drop, allowing homebuyers the opportunity to enjoy lower interest rates — but they won’t drop in a dramatic fashion. The Fed will likely cut -25 bps at a time vs. the -300 bps Trump wants.

The result will instead be ~5% interest rates on mortgages with higher demand as more homebuyers have inflated assets to use to pay for their down payments with a still very limited housing supply.

Gold is up +105% and Bitcoin is up +450% over the last three years. The market knows higher inflation is here to stay — which means only those who own assets will beat inflation over the coming years.

On top of all of this, Jerome Powell is out of a job in eight months — and I assume Trump will appoint someone who will continue to cut interest rates as that has been something he’s been very vocal about.

✅ What You Should Do

Be a net-buyer of assets.

Sure, the markets will continue to experience its normal ups and downs, but Jerome Powell just made it crystal clear he’s now laser-focused on the unemployment rate and ensuring Americans stay gainfully employed. By ignoring (maybe not entirely) the rising inflation our country is facing, inflation will likely accelerate.

Do you remember what the stock market did when inflation accelerated dramatically during 2020 and 2021? It skyrocketed — as did the values of homes, businesses, and other risk-assets.

I have a hunch we’ll experience continued momentum in the markets over the coming quarters as the Fed cuts rates, leaving non-asset owners in the dust.

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