Dividend Investing to $1 Million #7: Rate Cut Relief
The Feds actually cut rates. It’s only a quarter of a basis point, but it’s something. Let’s see how my portfolio fared after this rate cut.
Table of Content
Hey guys, welcome back to another dividend portfolio update for my Dividend Investing to $1 Million series.
August was a decent month for the market, all things considered. Despite ending August on a somewhat sour note as AI-linked companies posted softer than expected earnings and caused the market to slide lower before closing, the S&P500 still notched 1.9% in gains for the month.
On top of that, there are a number of other positives we can take away from August, with some key events to look forward to in September.
Here’s a summary of what transpired in August.
August’s Market News
1. The Fed Signals a September Rate Cut, Sending Bond Yields Down
What Happened: In a highly anticipated speech at the Jackson Hole Economic Symposium on August 22nd, Federal Reserve Chairman Jerome Powell hinted that the central bank is “preparing to ease policy” in view of the weaker-than-expected jobs report from July.
Simple Explanation: Powell’s speech on 22nd of August was the clearest signal yet that the Fed is ready to start cutting interest rates. He said, and I quote verbatim:
With policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance.
Lots of needlessly complicated jargon, but he’s essentially saying that he’s open to finally lowering interest rates. There’s an uproar over this as if this comes to fruition, it will be the first rate cut in close to 9 months and a big shift in the Fed’s stance towards interest rates.
Potential Impact on Markets:
- Lower Bond Yields: Bond yields have already dropped significantly as investors rushed to lock in higher rates before the expected Fed cut. This is a clear sign that the market believes the Fed will follow through.
- Tailwind for Stock Market: With lower bond yields, the fixed-income market becomes less attractive to investors. This could lead to a flow of money from bonds back into stocks, providing a strong tailwind for the stock market.
- Increased Spending and Investment: Lower interest rates make it cheaper for companies and individuals to borrow money. This could stimulate the economy as businesses expand and consumers spend more on big-ticket items like homes and cars.
How This Could Affect Us: This is a pretty big deal. Lower interest rates typically lead to stock market growth as investors withdraw their money from safer instruments due to the lower yield and shift them back into stocks. However, let’s not forget that a rate cut is essentially confirmation that the US economy is weakening, so it’s not all good news and we shouldn’t get too excited.
Another potential damper is that the Feds have historically only lowered interest rates by 25 to 50 basis points every FOMC meeting. It’s still a drop in interest rates and will nevertheless cheapen lending costs, but I doubt it will ignite a spending boom for both companies and consumers due to major headwinds such as a weak labor market and tariff uncertainty.
2. US Court of Appeals Strikes Down Trump’s Tariffs
What Happened: In a landmark decision on August 29th, a U.S. Court of Appeals for the Federal Circuit struck down a large portion of President Trump’s tariffs, ruling 7-4 that they were unconstitutional. The court upheld a lower court’s finding that the President had overstepped his authority by imposing the tariffs without specific congressional approval.
Simple Explanation: About 4 months ago on the 29th of May, a lower court called the Court of International Trade blocked Trump’s Liberation Day tariffs from going into effect, ruling that he had overstepped his authority. The Trump administration naturally appealed and this case was escalated to the Court of Appeals. On August 29th, the Court of Appeals also found that Trump’s tariffs were illegal. It’s a powerful jab-cross combo and yet another big blow to Trump’s trade policies. This decision, if it stands, would effectively cancel all tariffs that were scheduled to go into effect and could also force the U.S. Treasury to refund billions of dollars in collected duties.
Potential Impact on Markets:
- Short-Term Market Rally: The market expectedly responded positively to the news. Things could finally return to normal with lower consumer prices and stable supply chains.
- Supply Chain Relief: All businesses with global supply chains can breathe a sigh of relief as they no longer have to fret about the cost of importing goods suddenly increasing (or decreasing) at one man’s whim.
How This Could Affect Us: This would truly be a big, beautiful win… if it stands. Don’t get too excited yet as nothing is set in stone. Following another appeal by the administration, the outcome now hinges on the Supreme Court. The only upside is that the Supreme Court has agreed to fast-track this hearing (at the request of Trump’s administration) and scheduled to hear oral arguments as soon as the first week of November.
I guess it’s possible for us to get an update on this before the end of the year.
3. Trump’s Shift Towards Central Governance
What Happened: The Trump administration made a series of moves in August that signaled at a potential shift toward a more centrally governed economy. Key examples include:
- The government’s acquisition of a 10% equity stake in Intel, a deal where the administration converted federal grants into a direct ownership stake in the company.
- The administration’s continued support for struggling coal and steel industries, with reports of direct orders being issued to companies on the verge of shutting down to stay open and increase production for the “good” of the country.
- Earlier In June, Trump also approved the controversial merger of U.S Steel with Japan’s Nippon Steel and slipped in a “golden share” arrangement, allowing him sweeping veto power over the company’s decisions in key business areas
Simple Explanation: I deliberated whether I should add this or not, but I thought it was worth pointing out as it’s a significant departure from the free-market capitalism the U.S. has long been known for. If these moves are any indication, Trump wants to be able to direct and influence the direction that companies in the US take.
Potential Impact on Markets:
- The End of Free Markets (?): Trump’s move to take a direct stake in Intel blurs the line between capitalism and socialism. While it might temporarily prop up a struggling company, it sends a dangerous signal that other US corporations (and eventually, any company in the US) could be next in line.
- Declining Investor Confidence: Perhaps the biggest risk is to overall market trust. If foreign and domestic investors start seeing the U.S. economy as vulnerable to political intervention, capital could flee to safer, more transparent markets. That means weaker demand for U.S. equities, higher borrowing costs, and in the long run, a deterioration of the U.S. dollar’s dominance.
How This Could Affect Us: For those of us invested in U.S. stocks, this is a major long-term concern. If this continues, a company’s fundamentals might no longer be the key concern for investors. We would have to consider if their decisions are driven by economics or politics… and also if they’re in favor with the POTUS.
Let’s hope it never gets to this point.
4. The Head of the BLS is Replaced by a Partisan
What Happened: Following the dismal July jobs report, President Trump fired Erika McEntarfer, the head of the Bureau of Labor Statistics (BLS). He then nominated E.J. Antoni, a conservative economist from the Heritage Foundation, to lead the agency.
Simple Explanation: The BLS is the agency responsible for gathering and reporting on key economic data, like the jobs report and inflation numbers. It’s supposed to be an independent, non-political organization so that everyone can trust the data. Trump pissed lots of people off by firing the head of the agency after a bad report as if it was her fault that the job market is in the dumps and replacing her with a partisan economist. Many public figures and famed economists are now calling the integrity of data from the BLS into question.
Potential Impact on Markets:
- Loss of Credibility: If investors can’t trust the reports from the BLS as there’s a possibility the data is being manipulated for political gain, they will stop regarding it as an accurate depiction of the state of the U.S economy. This impacts the BLS’ credibility.
- Higher Volatility: A lack of reliable data makes it harder for everyone—from the Fed to individual investors—to make sound decisions. This uncertainty will result in increased volatility in the market as investors start speculating and investing on a whim.
How This Could Affect Us: I think I’ve already gotten my point across. It’s clear that this appointment – if it comes true as it’s still subject to review by the Senate – will shake up the markets.
Thankfully, according to former BLS commissioner Erica Groshen, any serious attempt to fudge the data would require a complete overhaul of the agency’s methodology and the hundreds of employees. Pulling that off without triggering whistle-blowers or sparking outrage would be nearly impossible.
So… looks like we have nothing to worry about.
Market Performance
August was yet another strong month, with only a slight dip at the tail-end preventing it from being considered fantastic. The S&P500 closed above the 6,500 mark for the first time on Thursday, the 28th of August, notching yet another new high and 4 consecutive months of growth. It seems like nothing can slow its momentum down at the moment, though I must say that the market was spurred on by several pieces of good news.
S&P500 Global reported that the S&P500 index was up 1.91% in August for a total of 9.84% YTD.
My Stock Purchases
It’s the most uneventful month thus far. As usual, I deposited S$1,150, but I only deployed US$250 into CSPX and VWRA respectively in August. I kept everything else in cash as I continue saving towards another lot of DBS.
Currently, I have roughly S$1,200 on hand. One lot of DBS is about S$5,000 right now. Assuming I continue what I did last month (only DCA-ing into CSPX and VWRA and saving S$500), it’ll still take me at least 7 more months before I can afford it.
I’m only going to be able to buy DBS next year.
Now that I put things into perspective, it does sound quite ridiculous. But I’m not going to complain since I actually feel quite comfortable sitting on more cash at the moment. I explain more about this in my closing thoughts section!
My Portfolio Performance
Overall Performance
My portfolio saw the biggest year-to-date jump following the month of August as global markets rallied.
I gained 5.7% in the month of August alone.
My overall portfolio return is also back up, reaching close to 19%. In absolute dollars, my returns have increased almost $3,200 since the start of the year. In other words, I managed to grow my returns by over 61% (8461/5232) in a mere 8 months.
That’s pretty damn good.
Year to date, net of contributions, my portfolio is up 12.78%.
In comparison, year to date, the S&P500 did 9.84% in returns.
Yeah, you heard that right. My portfolio actually beat out S&P500 so far in 2025.
Trust me. I was taken aback too. I had to go back and double check my numbers to ensure I didn’t make any mistakes in my calculation.
So, here comes the most important question. How was I able to beat out the S&P500?
Initially, I thought it might have been thanks to my increased exposure to Singapore stocks – the STI is having an incredible year so far with almost 14% returns YTD, beating out the S&P500 – but a deep-dive into the numbers proved otherwise.
It ultimately came down to my portfolio weightage. Since I’m running a dividend-only portfolio, my stock picks and their weightage naturally deviate drastically from that of the S&P500.
And it just so happened that some of my stock picks paid off with massive gains.
Altria (+32%), Google (+24%) and Microsoft (+18%) are three stocks in particular that far outpaced the S&P500’s 9.8% YTD returns. These 3 stocks account for around 35% of my portfolio.
My other stocks like Visa (+9.1%) and Coca-Cola (+10.5%) did decently too, either keeping pace or just falling short of the S&P500.
Of course, there were underperformers too like SCHD, Exxon Mobil and Apple, but they only served to balance the scale out.
So… that’s how my humble dividend-focused portfolio managed to beat the S&P500 so far this year. A huge achievement, but not really a big deal in the grand scheme of things.
Anyway, below is a chart showing my total portfolio value split into my capital investment (blue) and my actual returns (green) over the course of 2025.
We can see that my total return as of the end of August is the chonkiest it’s ever been this year. We all love a chonky boy.
Fingers crossed it stays that way.
Performance by Stock
My portfolio’s growth was, as mentioned above, driven by a strong showing from a couple of my US stocks. My SG holdings didn’t do too bad either, but it’s just the DBS show at the moment.
So… in August:
The biggest loser was Microsoft (-6 pp).
The biggest winners were Google (+23pp), Apple (+17 pp), and Altria Group (+10pp).
Dividend Payouts
I received S$174 in dividends in August from AAPL, OCBC, Keppel and DBS.
It’s yet another record-breaking month this year, beating out my previous highest-dividend month of May (S$133) by almost 30%.
This brings the total dividends I have received year to date up to S$636. This is already more than my entire dividend payout from 2024 (S$545), and we still have 4 more months to go!
I’m actually very curious about the total dividends I will receive in 2025. It’s possible that I might surpass the $1,000 mark.
Closing Thoughts
August was by far the best month for me in 2025. The biggest capital gain I’ve made in a single month and the most monthly dividend payout I’ve ever received.
Things seem to finally be picking up, and I’m happy.
But… I don’t want to be talking about my wins in this section. Instead, I want to take this chance to explore a topic that’s been coming up more and more often these days. This is also the reason why I’m entirely fine with having so much cash just sitting around in my brokerage account.
It’s the notion that we’re in the midst of an AI bubble.
It might sound strange to question things when the market is soaring… but that’s exactly when you should pause and think.
As Warren Buffett reminds us: “Be fearful when others are greedy, and greedy when others are fearful.”
When markets were flat earlier this year, I needed that reminder. Now, with valuations soaring, I need the other half of that wisdom.
Many prominent figures the likes of OpenAI CEO Sam Altman and Alibaba’s chairman, Joe Tsai have come out over the past couple of months saying that we might already be in an AI bubble or there will be one emerging soon. Trillions of investment are being poured into the AI space, driving up valuations to never-seen before levels. It’s getting to the point where investors seem ready to open their wallets and write a blank cheque to fund anything powered by AI in some shape or form.
A study by MIT shows that 95% of enterprise AI initiatives fail to deliver measurable returns, with only 5% accelerating revenue. I won’t bore you with the details – I’ve attached the link to a brilliant explanation by Fortune so you can read it if you’re interested. But in summary, money is being spent by major corporations on AI initiatives that never translate into actual results.
In fact, we have a perfect example right under our noses: Apple.
The crown jewel of America’s tech industry is facing significant AI delays with its AI-powered assistant “Apple Intelligence” and Siri enhancements being postponed. Engineering issues with its hybrid architecture have been holding them back, and it’s likely that they’re going to have to do a full rebuild with help from external partners such as OpenAI. This is despite them investing a huge sum of money – roughly estimated to be $20 billion over the last 5 years – into its development.
And the worrying thing is that such cases truly aren’t one in a million. I’m almost certain we’ll start to see more and more of this over the course of this year and the next as companies start bleeding money and have to shut down these projects en masse.
In a nutshell, I’m cautious. I’m being realistic. I acknowledge that we could potentially be in dangerous, uncharted territory and anything is possible.
I’m not saying that a correction is imminent. As long as the money continues flowing and demand for AI products continue to accelerate, the bull run will keep going. But the moment the money dries up and AI isn’t growing as fast as people initially expected?
That’s the moment shit hits the fan.
I may or may not do a deeper dive on this in a separate blog post (it depends on my mood, sue me), but that’s a truncated version just to voice out my thoughts.
I would also link this amazingly well-researched YouTube video that perfectly explains why we might be seeing a correction soon, taking into account the very factors that have brought the market to where it is today. Do give it a watch if you’re interested!
P.S. I want to emphasise once again that market forecasts are exactly that – forecasts. Yes, they’re grounded in data, historical patterns, and the economic signals we see today (like employment numbers or inflation trends), but at the end of the day, they’re still just educated guesses. Take them with a mountain of salt.
So… back to the main point of discussion!
Despite everything, I’m cautiously optimistic for September. If Powell indeed carries through with his plans and slashes interest rates, it might just be enough to keep the momentum going.
If not, with how the markets have already priced in a rate cut, we might see a big reversal.
But once again, I’ll like to reiterate that regardless of what happens to the market, my investment philosophy will NOT change.
I will continue to DCA a fixed amount of money each month into the stock market. I’m just going to tweak the amount slightly so I feel more comfortable knowing that I have enough savings to tide me through even the worst of scenarios.
Progress Summary
Seeing the capital appreciation line on this chart tilt upwards at a visible gradient in August is a nice change after a year of stagnation.
I am now 53% of the way to my first big milestone.
And that about does it for this month’s update!
If you want to follow my journey towards financial freedom in more detail, you can also read My Financial Breakdown series where on a quarterly basis, I dive deep into every aspect of my finances (fully revealing my net worth, salary, expenses and other juicy stuff) and what I intend to do to reach my finance goal.
Until next time.
Stay safe, stay financially savvy, and most importantly, stay invested.
Cheers!
Related Posts
Dividend Investing To $1 Million #5: The Tariff End Game
Trump’s tariffs are back in full effect and the Feds continue holding firm with elevated interest rates. Here’s how my portfolio fared during this period.
Dividend Investing To $1 Million #4: Trade + War
Trump just dropped the bombshell. No, literally. As war rages on in the Middle East and the Feds opt to keep interest rates unchanged, let’s see how my dividend portfolio fared during this period.
Made with Bullet