WEEKLY BRIEF | Earnings Do the Talking

Hello, and welcome to the IVA Weekly Brief for Wednesday, May 27.

There are no changes recommended for any of our Portfolios.

Before this week’s market update, a personal note.

My wife and I are expecting our second child—a daughter—in the coming weeks. Thankfully, our five-year-old son is standing by as a (somewhat) capable helper.

A quick word on what to expect from The IVA during this stretch:

All paid content delivery—IVA Research and Monthly Recap articles—should remain on schedule. And if something meaningful happens at Vanguard or in the market, I’ll be on it.

What I’ll likely skip is the free Weekly Brief during the few weeks after she arrives. I’d rather be upfront about that now than scramble to publish something that’s only half-baked.

As always, I appreciate your patience, your support and your trust.

More soon.

This stock market just won’t let up.

500 Index (VFIAX) has rallied 15.4% in the second quarter. Some of that is simply the market bouncing back from the Iran-war selloff. (You may recall that 500 Index dropped 4.3% during the year’s first three months.) But there's a more durable story than just a market bounce-back: corporate earnings are growing—and growing faster than almost anyone expected.

According to Factset, S&P 500 companies grew earnings 28% in the first quarter compared to a year ago—the strongest showing since Q4 2021. The Magnificent Seven led the charge, with earnings up 63%. But here's the more encouraging number: the other 493 companies in the index grew earnings 17%—also the best in years.

A few caveats on the Mag-7 figures. Some of those profit gains are on paper only, not the result of business success. Alphabet (Google) booked a $37.7 billion unrealized gain on investments. Amazon recorded a $16.8 billion pre-tax gain tied to its stake in AI-leader Anthropic. Meta (Facebook) got a one-time tax benefit worth roughly $8 billion. Those items boosted the headline numbers—and could just as easily reverse.

Still, the breadth of the earnings picture is hard to dismiss. When growth is showing up across 493 companies—not just seven—that's a real signal, not a statistical quirk. And analysts are projecting earnings growth of 21% in the second quarter.

The bottom line: earnings drive stock prices over time. For all the noise out of Washington, as long as corporate profits keep growing, the wind stays at the market's back.

Missing Maturities

That “refreshed website” CEO Salim Ramji promised can’t come soon enough.

The latest snafu: average maturity data is missing from the profile pages of Vanguard's municipal bond funds. Average maturity is a standard datapoint—one any fund investor would want at a glance.

As an example, here’s a screenshot from Intermediate-Term Tax-Exempt’s (VWITX) profile. As you’ll see, the data simply isn’t there—the line-item isn’t mentioned.

When I flagged it, Vanguard told me the maturity figures are displaying correctly on its Financial Advisors and Workplace Solutions sites, but not on the retail investors’ Personal Wealth site, and that "addressing it requires backend updates."

So, it's in the queue.

To be fair, Vanguard does it right sometimes, too. I recently consolidated two IRAs. The representative I spoke with was helpful, the process was smooth and the transfer landed the next business day—well ahead of the three to five days I'd been told to expect.

I call out Vanguard when they get things wrong. I’ll also give credit where it's due when they get things right.

Our Portfolios

Our Portfolios are showing solid returns for the year through Tuesday. The Aggressive Portfolio is up 12.5%, the Aggressive ETF Portfolio is up 10.7%, the Growth Portfolio is up 11.0%, the Moderate Portfolio is up 11.5% and the Conservative Portfolio is up 6.6%.

This compares to a 10.5% gain for Total Stock Market Index (VTSAX), a 14.1% return for Total International Stock Index (VTIAX), and a fractional 0.04% return for Total Bond Market Index (VBTLX). Vanguard’s most aggressive multi-index fund, Target Retirement 2070 (VSNVX), is up 10.9% for the year, and its most conservative, LifeStrategy 20/80 (VASIX), is up 2.6%.

IVA Research

Yesterday, in Mid-Caps, Mixed Results, I walked Premium Members through Vanguard's mid-cap growth lineup—from the case for MidCap Index (VIMAX) to an early read on Tremblant Capital's work at MidCap Growth (VMGRX).

Until my next IVA Weekly Brief, have a safe, sound and prosperous investment future.