Economic data continues to reflect a “cooling, not cratering” scenario, albeit with notably more labor market cooling ¹

• Economic data continued to show some consumer and business slowing, taking growth from above 2% to below 2% in 2025.
• July labor market data, with notable downward revisions to prior months, caused a bit more concern about quicker cooling.
• Economists’ base case expectations are for moderate upside in inflation and downside in GDP growth, but not as far as 2021 inflation levels nor recessionary GDP levels. Recent tax and spending legislation, as well as deregulation, offer potential upside tailwinds.

US corporate earnings continue to beat expectations, but valuations have richened even faster ²

• 2Q S&P 500 earnings are currently on track for over 10% growth, continuing to show resiliency and being led by several of the “Magnificent 7” companies that are at the forefront of the AI revolution.
• But valuations for the Magnificent 7 and the broad index have stretched even higher, already pricing in good earnings.
• …so the debate rages on over the potential long-term exponential returns to AI winners vs. near-term rich valuations.

August tariff deadlines provided a barrage of deals – average rates marginally higher than expected at 18.4% ³

• Numerous key deals were announced, providing some clarity, but the impact of tariff rates at 18.4% is a “known unknown”.
• Outstanding negotiations with several large trading partners and court challenges to the Trump administration’s use of the International Emergency Economic Powers Act (IEEPA) also remain known unknowns.

This is a summary of our report.