Rewey Asset Management (RAM) recently concluded its second-quarter 2025 operations, reflecting on a period characterized by market resilience amidst geopolitical uncertainties and evolving economic landscapes. The firm's Smid composite recorded a 6.11% gain, modestly trailing the Russell 2500 Value Total Return index's 7.29% increase. This slight divergence underscores the inherent variability expected from a concentrated investment strategy, with 28 active positions by quarter-end. Despite a year-to-date return of -1.29% for the composite against the Russell 2500 Value's 1.03%, RAM views the quarter as largely in line with expectations, maintaining an optimistic outlook for the small and mid-cap (Smid) value sector as the year progresses.

During a quarter fraught with potential market disruptions, including tariff debates and military actions, the U.S. economy's underlying strength emerged as a critical support for market performance. Contrary to initial fears of inflation and negative GDP, the market largely absorbed these concerns, with most indices showing gains. RAM points to the robust U.S. economic fundamentals, projecting a 1.4% GDP growth for 2025, thereby dismissing recessionary fears for the second half of the year. This stable economic backdrop, coupled with the fading influence of broad macroeconomic drivers like quantitative easing, sets the stage for a potential rotation of investor capital away from large-cap technology stocks and into the undervalued small and mid-cap segments, which RAM believes remain ripe for active stock selection given their limited liquidity and extensive, under-researched universe.

RAM's strategic adjustments in the second quarter included adding two new holdings and divesting six, increasing the combined weight of its top ten holdings to 47%. The firm's investment philosophy prioritizes companies demonstrating financial strength, growth potential, and attractive valuations. While acknowledging the inflationary risks associated with tariffs, RAM suggests that the market's fear may be overstated, estimating a manageable impact on inflation due to various mitigating factors and ongoing trade negotiations. Looking ahead, Rewey Asset Management remains committed to its value-oriented approach, leveraging economic resilience and increased focus on security selection to navigate market volatility and achieve long-term value creation. This involves a diligent process of identifying financially sound companies capable of generating value, reinforcing the belief that patience and a clear investment roadmap are powerful tools in today’s dynamic financial environment.

Former leaders of the United States Federal Reserve, Ben Bernanke and Janet Yellen, have recently underscored the vital importance of the central bank's autonomy in shaping the nation's economic future. Their combined wisdom, shared through a significant public statement, serves as a poignant reminder of the delicate balance required to maintain a stable financial environment. They assert that allowing political motivations to dictate monetary policy would inevitably erode public trust, lead to unchecked inflationary spirals, and inflict considerable harm across all sectors of the economy. This powerful message advocates for unwavering adherence to an independent, data-driven approach in all Federal Reserve decisions.

Their concerns extend to the upcoming selection of the next Federal Reserve chief, urging the current administration to prioritize a candidate committed to safeguarding the institution's non-political stance. The former chairs’ intervention highlights a broader debate within economic and political spheres about the boundaries between governmental policy and central bank operations, particularly as the incumbent Fed Chair, Jerome Powell, approaches the end of his term amidst ongoing political scrutiny. Their cautionary advice resonates as a call for fiscal prudence and a defense of foundational economic principles, emphasizing that the long-term health of the economy hinges on the ability of its monetary authorities to operate free from immediate political pressures.

Preserving Central Bank Autonomy

The Federal Reserve's independence from political influence is paramount for ensuring sound monetary policy and maintaining economic stability. Former Fed Chairs Ben Bernanke and Janet Yellen articulated this conviction in a recent statement, emphasizing that the central bank’s ability to make decisions based solely on economic data, rather than political expediency, is crucial for preventing adverse economic outcomes. They underscored that political interference could lead to detrimental consequences, such as higher inflation and significant economic disruption, affecting everything from household finances to national debt. Their message serves as a powerful reminder that an uncompromised central bank is a cornerstone of a robust economy, capable of navigating complex financial landscapes without succumbing to short-term political demands.

Bernanke and Yellen's detailed argument highlights the historical lessons learned from periods when central banks were subjected to political pressures, resulting in distorted economic policies and instability. They stressed that the perception of political influence can undermine global confidence in the U.S. financial system, potentially leading to increased borrowing costs for consumers, businesses, and even the government. This erosion of confidence stems from the market's need for predictability and impartiality from its monetary authority. Therefore, they advocate for the selection of a new Federal Reserve Chair who possesses not only deep economic expertise but also an unwavering commitment to the Fed's independence, ensuring that future policy decisions continue to serve the long-term interests of the American economy and its citizens, free from partisan agendas.

The Stakes of Political Pressure on Monetary Policy

The warnings from former Federal Reserve Chairs Ben Bernanke and Janet Yellen illuminate the profound risks associated with political pressure on monetary policy, particularly from the executive branch. They contend that any attempt by political figures, such as former President Donald Trump, to influence the Fed's interest rate decisions could dismantle the institution's credibility and lead to an uncontrollable surge in inflation. Such pressure, if successful, would shift the basis of monetary policy from objective economic indicators to subjective political whims, potentially causing market volatility and undermining investor confidence. This scenario, they argue, would inevitably result in economic damage, manifesting as higher borrowing costs, stifled investment, and a general downturn in economic activity.

The current discourse surrounding the Federal Reserve’s leadership, especially as Jerome Powell’s term concludes, underscores the urgency of these warnings. The debate over whether the next Fed Chair will uphold the tradition of independence or succumb to political alignment is a critical determinant of future economic stability. Concerns voiced by various economic experts and former government officials, including criticisms of past and present administrations' economic policies, reinforce the narrative that the integrity of the Federal Reserve is under scrutiny. The former chairs' intervention, along with the broader discussions, serves as a crucial call to action for policymakers to respect the institutional boundaries that safeguard the Fed's autonomy, recognizing that the economic well-being of the nation far outweighs any immediate political gains from short-sighted monetary interventions.