Welcome back to Stacking Equity, where we break down the major financial and tech news with less mystery than the non-existent Epstein list and with more of an appetite than Joey Chestnut at Nathan’s on the Fourth.

Dual Perspectives: Why the News and the Numbers Don’t Match

We've talked ad nauseam about not getting caught up in the hype of news cycles and doom-and-gloom narratives. But given where we are right now, it's worth taking a closer look at why that guidance matters. There's a surprising disconnect between the economy and the stock market, and many of the benchmarks we follow don't tell the full story. Let's break down these dual perspectives to help you see through the noise and focus on what really matters.

Market Highs vs. Economic Reality

Despite a year filled with volatility and anxiety-inducing headlines, the markets have pushed higher and are hitting record highs. If you only glance at the Dow or NASDAQ, you might think the economy is thriving. But the economic fundamentals paint a different picture:

• Q1 GDP revision shrank year-over-year (-0.5%)
• Consumer sentiment is down (-5.4 points)
• The labor force participation rate is down to its lowest level since late 2022 (62.3%)
• Inflation is expected to tick up
• New tariffs and the 'beautiful' bill are adding friction to growth

This disconnect between economic data and market performance is glaring. The stock market is not the economy, and it's important to remember that market prices often reflect expectations about the future rather than current conditions.

The Geopolitical Noise Trap

We tend to overestimate the impact of political and geopolitical events on our financial future. History tells us that out of 36 major geopolitical disasters in the modern era, only the 1970s oil crisis left a sustained scar on the markets. This means that while headlines can be scary and unsettling, their long-term impact on markets is often limited. The lesson here is clear: news ≠ reality. Federal and fiscal policies (i.e., political decisions) usually equate to a bug on the windshield of the Mack truck, which is the economy. Don't let the constant barrage of headlines dictate your investment decisions or shake your confidence.

Benchmarks: What They Really Measure

Benchmarks like the Dow and NASDAQ are up big this year, but they're terrible proxies for the average investor's experience. If you strip out the so-called "Magnificent 7" - the handful of AI, cloud, and social media giants driving much of the gains - the rest of the market looks far less impressive. These indices are more a reflection of the wealthiest 10% in the U.S. and the top 1% globally than a broad measure of economic health. Understanding what these benchmarks actually measure helps you avoid the trap of thinking the market's performance means the economy is doing well for everyone.

Let's break down why these benchmarks are so flawed:

The Dow: Stuck in the Past

• Price-Weighted, Not Value-Weighted: The Dow Jones Industrial Average doesn't measure companies by their size or importance, but by their price. This means a company with a high stock price, but a small business can move the Dow more than a giant company with a low stock price. Imagine a $500 stock from a small company swinging the whole index, while a $50 stock from a massive company barely makes a dent.
• Only 30 Companies: The Dow tracks just 30 companies - out of thousands in the U.S. market. That's like judging the knowledge of an entire city by the results of a single classroom.
• Old-School Lineup: The Dow's list changes slowly and doesn't keep up with fast-growing industries. Many of America's most important tech and growth companies aren't even included, or only recently made the cut.

The NASDAQ: Tech-Heavy and Top-Heavy

• Mostly Tech: The NASDAQ is packed with technology companies, so when tech stocks soar, the NASDAQ looks great - even if the rest of the market is struggling.
• A Few Giants Dominate: A handful of massive companies (think Apple, Microsoft, Nvidia) make up a huge chunk of the NASDAQ's value. If these few stocks go up, the whole index rises - even if hundreds of other companies are flat or falling.
• Not Representative: Because it's so tech-focused, the NASDAQ doesn't show how other parts of the economy (like manufacturing, healthcare, or consumer goodsare really doing.

Why It All Matters

It’s tempting to take market highs at face value, especially when the Dow and NASDAQ are flashing green and the headlines are shouting about new records. But those numbers only tell a fraction of the story - and often the most flattering part. The reality is that the stock market, the broader economy, and the news cycle each play by their own rules, and conflating them can lead to confusion, frustration, and poor decision-making.

So, what do you do? Don’t get caught up in the numbers CNBC shoves down your throat. The market’s job is to distract and confuse; your job is to keep stacking, stay diversified, and focus on your own “health and happiness” index. Long-term success comes from tuning out the noise, understanding what really matters, and sticking to a plan that works for your life - not just for Wall Street’s scoreboard.

On a personal note, one of our closely held beliefs is that it’s important to take any investment hypothesis or planning idea seriously. Trust me, there isn’t a question or idea out there that would surprise me at this point. What we’ve found is that when we do that, it turns out that the conclusion of that exercise is generally the same – a globally diversified portfolio focused on equities, with a thoughtful cash management strategy and a purposeful trading plan tends to be the clear path forward. So for those of you looking to turn down the volume on the market noise, consider the best path forward and through.

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Robinhood’s Tokenized Stocks: Innovation or Illusion?

Robinhood is shaking things up by introducing tokenized shares of stocks – because why not make investing more confusing for the average Joe? Essentially, this means that Robinhood will buy the shares in a company and then issue tokens representing those shares to individual investors to make trading accessible 24/7. Additionally, they plan on utilizing tokenization to provide access to private companies (think SpaceX and OpenAI), creating a liquid exchange for the private sector that is currently only available to 'accredited' investors (read: wealthy). As of now, this is only in Europe, but global expansion is on the horizon.

The Importance: Sounds democratizing, but here's the catch: tokens are not actual shares. Stocks are legal contracts. However, with tokens, there is no legal recourse or regulatory safety net – they simply promise that Robinhood is good for the shares. But how could you not believe tech bro Neo, the creator of meme stocks?

While this is an exciting development, it's a reminder that "innovation" in finance often comes with fine print. Robinhood's mission to "empower the retail investor" is noble, but transparency matters - remember their margin lending fiasco? The same lesson applies, so if interested, please read up first.

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Nuclear Energy's Image Makeover

Zach and I have been watching it for a while now, and nuclear energy could finally be having a moment. New York just approved plans for the first major reactor in a decade, signaling a real shift in the U.S. energy landscape.

Meanwhile, tech giants are making nuclear cool again: Meta has signed a 20-year deal with Constellation Energy to buy all the output from Illinois' Clinton Clean Energy Center. This partnership will keep the plant running, support upgrades, and supply enough carbon-free power to match Meta's expanding AI data centers. Not to be outdone, Amazon inked a long-term deal with Talen Energy to secure nearly 2,000 megawatts of nuclear electricity (enough to power about 2 million homes) for its AWS cloud and AI operations in Pennsylvania. The two companies are even exploring new Small Modular Reactors (SMRs) and boosting output at existing plants to meet soaring demand.

The rise of AI is driving up energy demand, and nuclear is getting a second look.

The Importance: Yes, the ghosts of Three Mile Island and Chernobyl linger, but with modern tech, smart regulation, and a little PR magic (paging Ogilvy & Mather), nuclear is shaking off its "dirty and dangerous" reputation. These new deals do more than just keep the lights on for Big Tech: they preserve thousands of jobs, stabilize local economies, and help avoid millions of tons of carbon emissions over the next 20 years.

It could be the comeback story of the decade, where even Homer Simpson could be seeking a fat raise.

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Paypal, Klarna, and Affirm. You likely have seen the names in your online carts at checkout. These Buy Now, Pay Later (BNPL) platforms have seen climbing usage, but the numbers tell a cautionary tale. Nearly 20% of U.S. shoppers used BNPL during the 2023 holiday season—a 12% jump from the year before. In 2025, BNPL purchase volume is projected to top $122 billion, up almost 11% year-over-year.

But with growth comes growing pains. According to a recent Bankrate survey, nearly half of BNPL users have run into financial trouble:

• 24% spent beyond their budget
• 16% missed a bill payment after using BNPL
• 15% regretted a BNPL purchase
• 14% had issues with refunds or returns

The real kicker? Until now, these unique forms of credit haven’t actually impacted on your credit report. But that’s about to change. Starting this fall, FICO will begin factoring BNPL loans into credit scores. So if used wisely, it could help your score. But if you miss payments, your FICO could take a hit - just like with credit cards.

Takeaway: BNPL can be a useful tool. Still, it’s easy to overdo it – especially with impulse buys (I already told Zach to quit it with the late-night Taco Bell Cheesy Gordita Crunches). With these loans now impacting your credit, it’s more important than ever to use them wisely and keep track of your payments. We recommend limiting their usage for big-ticket items you could pay cash for, but spreading payments out would help reduce cash flow stress. Your future self—and your FICO score—will thank you.

-1- Mid-Year Equity Review

For those who receive equity compensation or participate in Employee Stock Purchase Plans (ESPPs), now that we have hit the half-year mark, it is a great time to review your withholding amounts and compare against your tax projections. There is only so much you can do to reduce taxes, but staying on top of withholdings can prevent the tax surprises that come next April.

-2- Quick Hits

Reader Answers: If there is one thing I can say definitively in this industry, it is that advisors are notoriously TERRIBLE at keeping things simple. Part of it is ego, wanting to show off how much technical knowledge we have. A dash of it is that we live in the space daily, so what we consider common knowledge isn’t at all. A massive amount of it is the industry itself, which makes this stuff way too complex on purpose.

Our goal is to meet our readers at their level and get you the answers to your questions. No jargon like basis point (0.01% btw) or insanely in-depth metrics like the Sharpe Ratio (a measurement of return above the risk taken).

So if you have any questions you finally want answers to, or topics you want covered, send them our way, and you might see your question featured in the next issue. There truly are no dumb questions.

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With that, the first half of 2025 is done and dusted – time to look forward to what H2 brings us.

Whether you’re here for the analysis, the insights, or just to see what meme I’ll shoehorn in next, I’m grateful you’re part of this community.

If you have thoughts, questions, or want to see a topic covered next month, reply to this email – I read every note.

And if you think a friend, colleague, or even that one uncle who still thinks Dogecoin is the future would enjoy or benefit from this, hit that forward button and help us grow the Stack – we will always appreciate it.

Until next time, keep stackin'.

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