Wealth Creation Investing Editors Square Off on Tariffs, Tesla Earnings, and Where Smart Money Goes Next
James Williamson, Editor-in-Chief, moderates a discussion between Richard Hale, Sandra McCall, and Reed Holloway on the biggest political and investment stories shaping July 2025.
Opening
JAMES WILLIAMSON:
Welcome to our quarterly market outlook. I’m here with Richard Hale, Sandra McCall, and Reed Holloway to discuss what’s driving markets as we head into the back half of 2025. The S&P 500 has recovered to within 4% of its February highs after the spring tariff volatility, Tesla reports deliveries tomorrow ahead of their July 23rd earnings call, and we’re seeing continued sector rotation around defense spending and AI infrastructure.
Tariffs and Institutional Rotation
WILLIAMSON:
Richard, let’s start with the tariff situation. The VanEck Steel ETF is up 18% since April despite the broader market uncertainty. What are institutions telling you?
RICHARD HALE:
The SLX performance captures exactly what institutional money anticipated. When Trump expanded trade measures in April, effective rates jumped from ~2.5% in January to 27% by April, then settled at 15.8% by mid-June. Smart money was already positioned in domestic-focused names via the Russell 2000.
13F filings from Q1 show CalSTRS increased Lockheed Martin by 23%, TIAA-CREF added Caterpillar—these moves happened weeks before public announcements. Meanwhile, the iShares U.S. Home Construction ETF is up 12% YTD on domestic infrastructure themes.
WILLIAMSON:
Sandra, does this early institutional positioning raise transparency concerns?
SANDRA MCCALL:
It highlights an information asymmetry. 13F filings come with a 45-day lag, so retail investors often see moves too late. More concerning, Article I, Section 8 gives Congress commerce authority, yet we’ve seen heavy use of the International Emergency Economic Powers Act for effective tax policy changes. These tariffs add ~$1,200 in household costs annually.
WILLIAMSON:
Reed, how do you see this?
REED HOLLOWAY:
Institutions see domestic resilience as a necessity, not just a policy response. The Invesco Aerospace & Defense ETF is up 14%, Applied Digital expanded AI data centers to 400 MW. The CHIPS Act’s $52B allocation shows this is beyond tariffs—it’s structural.
HALE:
Exactly. SPDR Metals & Mining ETF outperformed by 8%. Vanguard Industrials shows steady Q1 inflows—signaling staying power.
WILLIAMSON:
Sandra, does this timing imply coordination or just sharp analysis?
MCCALL:
Hard to disentangle. Institutions have Washington connections. But companies like Nucor and Cleveland-Cliffs also have inherent domestic advantages. The question is whether valuations are based on fundamentals or temporary policy premiums.
HOLLOWAY:
It’s about energy independence, semiconductors, critical manufacturing. The First Trust NASDAQ Smart Grid Fund up 11% shows grid modernization is needed regardless of political cycles.
Tesla: Deliveries, Energy Business, and Subsidies
WILLIAMSON:
Tesla reported Q2 deliveries at 384,122, down 13.5% vs Q2 2024 but above Q1. Stock rose 5%. Richard?
HALE:
Institutions expected worse. Q1 had automotive revenue down 13% YoY, while energy grew 7% to $1.6B. Morningstar says Tesla’s energy trades at a discount vs peers despite better integration. If they show a clear energy ramp-up on July 23, it could transform the thesis.
WILLIAMSON:
Sandra, thoughts on companies with policy support?
MCCALL:
Tesla shows both benefits and risks. EV credits and rebates helped them, but they’ve also built serious tech around batteries and automation. Bloomberg says EV cost parity by 2026 could lessen subsidy dependence.
WILLIAMSON:
Reed?
HOLLOWAY:
Tesla is about energy infrastructure—batteries, Superchargers, Megapacks. Wood Mackenzie sees grid storage needing to grow 500% over the next decade. Tesla’s scale gives them an edge.
HALE:
True. ARK keeps Tesla top-5 due to autonomy and energy. A strong FSD update July 23 could draw tech-focused reallocation.
AI and Infrastructure
WILLIAMSON:
The Tech Select SPDR is up 22% YTD, but there’s big dispersion. Richard?
HALE:
AI is splitting into infrastructure vs applications. Nvidia’s data center rev was $22.6B in Q1, up 86%. But iShares Tech-Software ETF lags by 6%. Goldman says only 23% of firms touting AI see real revenue lift—causing huge dispersion.
WILLIAMSON:
Sandra, how about policy in AI?
MCCALL:
I back basic NSF research, but not targeted industrial policy. CHIPS Act subsidies increased direct tech support by 340% since 2020. Markets generally innovate better than bureaucrats.
HOLLOWAY:
But some infrastructure like secure fabs or defense compute needs coordination. DARPA’s internet & GPS work proves public-private can still maintain competition.
HALE:
Institutional money acts like strategic planners. CalPERS upped tech infra from 3% to 7% of assets. The Fidelity MSCI IT fund tilted to infra all year.
Ukraine, Defense Spending, and Fiscal Pressures
WILLIAMSON:
Ukraine aid topped $113B since 2022. Sandra?
MCCALL:
Debt service is 13% of revenues. Hard to justify new spending. But much military aid buys U.S.-made replacements, which helps domestic industry.
HOLLOWAY:
It modernizes the U.S. base by 3 years, says CSIS. Aerospace & Defense ETF is up 11%. Supporting allies now lowers future costs.
HALE:
Lockheed +16%, Raytheon +19%, and ETFs keep seeing inflows. Even semis, advanced materials, and precision manufacturing benefit from defense demand.
WILLIAMSON:
Sandra, how does the Fed fit in? Core PCE was 3.8% in May.
MCCALL:
Fed tries to cool inflation while fiscal spending stays hot—$2T+ deficits expected through 2028. That forces either inflation tolerance or over-tightening.
HALE:
So money moves to banks. Financials up 8% since June FOMC, regionals outperform big banks by 4%.
HOLLOWAY:
Real assets like gold down 6% on higher real rates—could be a buy. Same for energy infra.
Predictions & Risks
WILLIAMSON:
Richard, highest conviction?
HALE:
Domestic value stocks, small caps, and if Tesla’s FSD update hits, tech. Defense and energy infra stay strong.
WILLIAMSON:
Sandra?
MCCALL:
Sustainable competitive businesses, not subsidy-reliant. Morningstar says policy-heavy firms show 23% higher earnings volatility.
HOLLOWAY:
Strategic infrastructure, domestic energy, resource control.
Biggest Risks
WILLIAMSON:
Richard?
HALE:
Policy surprises disrupting rotations. VIX at 18.5 vs 16.2 historical—markets still uneasy.
WILLIAMSON:
Sandra?
MCCALL:
Debt service risks. CBO sees 4.1% of GDP by 2028. Could force tough spending choices.
WILLIAMSON:
Reed?
HOLLOWAY:
Supply chain shocks. Still rely on foreign rare earths, chips.
Closing Themes
WILLIAMSON:
So: Richard follows institutional flows, Sandra sticks to fundamentals, Reed focuses on strategic independence. They all converge on domestic capacity, infrastructure, and reduced foreign reliance.
We’ll revisit these themes after the Jackson Hole Fed updates. Thanks for joining us for a thoughtful, multi-angle debate.