TL/DR –
The August 2025 stock market report highlights that valuations have risen more quickly than market returns and are mainly concentrated in five stocks. The report reveals that growth stocks remain at a high premium while small-cap stocks are highly valued but may require some time to yield returns. The report also identifies key areas of concern such as ongoing trade and tariff negotiations, slowing economic growth in the US, China, and Japan, and the expectation of an increase in inflation in the latter half of 2025.
Key Insights from August 2025 Stock Market Outlook
- Market valuations have outpaced returns and are concentrated in five stocks.
- Growth stocks continue to hold a high premium.
- Small-cap stocks present attractive valuations but may take time to yield returns.
As of July 31, 2025, the US equity market was trading at par with our fair value estimates, despite a 2.3% market rise in July. This is attributed to our fair value estimates increasing more than the market capitalization. Over the past month, we raised our fair value on 143 stocks under coverage while only decreasing it for 36 companies.
Interestingly, substantial capitalization increases were found in only five stocks. For instance, our fair value on Nvidia NVDA increased over 20% after the US government permitted the company to resume selling its H2O Ai GPUs to China. This move resulted in a $900 billion increase in Nvidia’s market capitalization, equivalent to almost the entire market capitalization of Tesla TSLA.
Similarly, we raised our fair value on Microsoft MSFT by almost 20%, equivalent to an $800 billion boost in market capitalization. This increase is comparable to the market capitalization of either JPMorgan Chase JPM or Walmart Health & Wellness News ; US News