Perspectives

Key Takeaways   In the absence of the usual monthly payroll report, the September ADP report contracted by 32k jobs, missing expectations and extending the trend of weakening employment. The September Dallas Fed Manufacturing Survey missed expectations, confirming weak growth and employment momentum. Consumer confidence fell again (from 97.8 to 94.2), reconfirming weakening labor signals. It is hard to justify the resumption of a Fed rate-cutting cycle when the economic expansion is dura… View More

Congressional Democrats have limited influence over President Trump’s policy agenda, but government funding requires 60 votes in the Senate, giving them leverage since Republicans hold just 53 seats. Votes will be used as leverage, putting the US government into a shutdown at midnight tonight.   Democrats' Position: ACA Subsidies Democrats are pushing to extend enhanced Affordable Care Act (ACA) tax credits, which expire at the end of 2025. They view this as an important policy priority an… View More

Earnings Projections Revised Upward for Q3, Contrary to Historical Trends As we near the end of the third quarter this week, optimism regarding Q3 earnings growth remains strong. Estimates have been revised upward throughout the quarter, now projecting an 8.8% increase, which goes against the historical trend of downward revisions. Seven of the eleven sectors are anticipated to report positive earnings growth, with four sectors expected to see growth in the mid-to-high teens. The technology se… View More

The loss of momentum in U.S. payroll job growth has been a concern. The FOMC statement noted last week that "job gains have slowed, and the unemployment rate has edged up but remains low" and followed that up with "the Committee … judges that downside risks to employment have risen." However, initial claims falling to 231,000 (240,000 on the 4-week average) were reassuring last week. Factoring out recent noisy readings due to fraud in TX, claims indicate economy-wide firing remains limited. U… View More

What is M2: M2 is a measure of the money supply that includes M1 (currency, demand deposits, and other liquid deposits like checking accounts) plus savings deposits, money market accounts, and certificates of deposit (CDs) with maturities of less than $100,000. It represents a broader measure of money available in an economy for spending and investment. If a tree fell in the woods, but the data said it didn’t, does it really mean anything? Despite what appeared to be relatively solid data, m… View More

Recent economic indicators suggest growing concerns about a potential recession. With calls for such an event expected to intensify. A weak jobs report has solidified expectations for an interest rate cut, as policymakers aim to stimulate economic activity. Analysts anticipate that discussions surrounding a recession will amplify in the near term, driven by persistent labor market challenges and broader economic uncertainties.   Key Points: Recession Concerns: Emerging signals indicate a … View More

U.S. real GDP was revised higher in 2Q, which helped keep NIPA corporate profits in positive territory (+1.7% q/q and +4.3% y/y). As profits are growing, the U.S. economy tends to avoid big trouble. Still, until U.S. economic growth becomes more broad-based (e.g., it includes housing, manufacturing, etc.), it seems critical that government policymakers keep U.S. financial conditions from tightening much. There are some cracks, eg, U.S. home prices declining m/m in June (both the Case-Shiller an… View More

Nvidia Once Again Takes Center Stage - It's that time of the reporting season again, when all eyes turn to Nvidia, which reports after the close on Wednesday. While most investors look for clues about the state of the AI capex cycle, it's equally important to pay attention to commentary around China. In recent quarters, Nvidia has been transparent about the dollar value of missed sales due to restrictions. The 15% sales commission effectively imposed by the U.S. government on Chinese sales will … View More

Strong Showing For Q2 After Lowered Expectations: Despite the lower expectations, Q2 is shaping up to exceed even the pre-liberation day growth expectations, with growth coming in at more than double the initial expectations of 12.9%. The spotlight remains on the most prominent companies, but we have seen strong performance. 9 of 11 GICS sectors exceeded July 1st expectations, and 8 out of 11 exceeded April 1st expectations. Second-quarter EPS currently stands at $66.84, more than $1.30 above w… View More

Summary After reaching new record highs, stocks fell last week (S&P 500 -2.34%). Breadth was notably negative as equal-weighted averages underperformed cap-weighted averages. The pullback related to growth concerns following a disappointing July non-farm payrolls report and sharp downward revisions to prior months. Advancing sectors were utilities (1.56%) and communication services (0.01%); biggest decliners were materials (-5.40%) and consumer discretionary (-4.54%).   Key Takeaways … View More