by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment today opens with a couple of notes on the global supply of rare-earth minerals, which are critical for many of today’s advanced technologies, weapons systems, and economic prospects. We next review several other international and US developments with the potential to affect the financial markets today, including growing tensions between China and Vietnam in the South China Sea and Federal Reserve Chair Powell’s notable speech last Friday.

China: In a little-noticed announcement on Friday, the Chinese government further tightened its control over the country’s rare-earth mining and processing industry. Most important, China’s system of export quotas for rare-earth materials will now apply not only to materials produced domestically, but also to those coming from abroad for refining. For example, companies in the rare-earth supply chain will face detailed new reporting requirements every month regarding their flows of rare-earth materials from both domestic and foreign mines.

• It is widely recognized that China holds extensive rare-earth reserves and has many large, productive mines, but its stranglehold over the world’s supply of rare-earth materials comes mostly from its near monopoly on rare-earth refining. Even when countries in the West or elsewhere can mine rare earths, the bulk of the ore must be shipped to China for processing.
• With the new reporting requirements for importing, processing, and re-exporting foreign rare earths, Beijing will be able to strategically clamp down on the business and further crimp global supplies of the critical minerals, if it so chooses.
• It can’t be stressed enough that the US-China trade war this year has brought into high relief the enormous economic leverage that Beijing enjoys from its control over global rare-earth supplies. In our view, the new administration in Washington has rightly recognized the broad economic leverage that the US derives from the fact that so many countries are dependent on exporting to it. Now that it is facing Beijing’s concentrated leverage with rare earths, a key question is how the US will shift its approach to China.

Malaysia: In another little-reported announcement last week, Malaysia said it will ban the export of unprocessed rare-earth minerals to help spur the development of its processing industries. The government said it would instead encourage foreign investment in downstream facilities if the projects involve local mineral processing, job creation, and technology transfers. It also said the export of processed rare-earth metals would be encouraged. The development illustrates the growing rush of countries and firms into the rare-earth business.

Vietnam: Based on recent satellite imagery, the Center for Strategic and International Studies says Vietnam has significantly expanded its effort to build artificial islets on reefs and outcrops in disputed areas of the South China Sea. Importantly, the report claims Vietnam’s effort will likely surpass China’s controversial island-building activity in the area. The news portends sharper territorial tensions between the countries and greater potential for a future military conflict that could disrupt global financial markets.

Japan-South Korea: At a summit in Tokyo at the weekend, Japanese Prime Minister Ishiba and South Korean President Lee promised each other that they would work to deepen their recent cooperation on military and economic issues, putting their World War II acrimony behind them. Reflecting the two countries’ new warmth, Lee’s visit marked the first time a new South Korean president has gone to Japan before the US since Tokyo and Seoul normalized diplomatic ties in 1965. Lee now heads to the US for a meeting with President Trump.

Germany: The IFO Institute today said its August business-sentiment index rose to a seasonally adjusted 89.0, beating expectations and marking its eighth straight monthly gain. The index of German businesses’ optimism about the future is now at its highest level since April 2024, despite the pressure from China’s excess capacity, the strong euro, slowing economic growth, and new US tariffs. The uptrend in optimism probably stems at least in part from Germany’s recent increase in defense spending and broader fiscal loosening.

United States-China: New reporting says Shan Liang, an award-winning HIV researcher and tenured professor at Washington University in St. Louis, will leave that institution to work in the Shenzhen Medical Academy of Research and Translation as director of its Institute of Human Immunology. Liang is the latest in a growing list of high-profile scientists leaving the US to return to his native China.

• We can’t confirm that the returns are more than in years past, but the large number of recent reports raises concerns about a widescale loss of talent to China that could threaten the US position in advanced science and technology. In turn, that could slow US economic growth and reduce investment opportunities over time.
• It also isn’t clear why more Chinese researchers might be returning to China. With the US-China geopolitical rivalry intensifying, some might feel less welcome here. China’s continued economic development could also be a draw. Other potential reasons could be more insidious. For example, Beijing may be pressuring or paying off Chinese researchers to contribute their talents to their home country. Some of the researchers could even be Chinese intelligence assets being repatriated to avoid arrest.

Canada-United States: Prime Minister Carney on Friday said he will remove Canada’s 25% retaliatory tariffs on a wide range of US food and other consumer goods, which were imposed by his predecessor. The US goods will enter Canada tariff-free starting September 1, so long as they comply with the standards of the US-Mexico-Canada trade deal. Removal of the tariffs should help reduce US-Canada trade tensions. The action is also expected to ease economic pressure on many of Canada’s small businesses.

US Monetary Policy: At the Fed’s annual symposium in Jackson Hole, Wyoming, last Friday, Chair Powell cautiously opened the door to a cut in the benchmark fed funds interest rate at the next policy meeting in September. As a result, futures trading suggests investors now see an 83.3% chance that the policymakers will implement a 25-basis-point cut next month and a high likelihood of at least one more cut by the end of the year.

• We think investors’ expectations for at least two rate cuts by the end of the year are reasonable, so long as incoming economic data cooperates.
• Importantly, the increased certainty of rate cuts appears to be broadening the stock market. For example, small-cap stocks saw out-sized price gains on Friday after Powell’s speech, while lagging large-cap sectors also performed well.

US Cryptocurrency Market: Banking lobbies such as the American Bankers Association have reportedly started warning US lawmakers that a loophole in the recent Genius Act could prompt bank customers to pull as much as $6 trillion of deposits from the banking system, tightening credit and raising interest rates. The provision in question allows crypto exchanges to pay interest to customers holding third-party stablecoins. The bankers’ complaint highlights the risk that stablecoins will draw funds from the banking system and potentially destabilize it.

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by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment begins with new data that is showing a resurgence in US economic activity this month. Next, we delve into several pivotal global developments including the EU’s push to create a digital euro, the growing trend of tariff evasion through transshipment, and the mounting pressure on postal services to implement new trade rules. We will conclude with an overview of additional global and domestic factors shaping the financial landscape.

Stronger Growth: On Thursday, the S&P Global PMI data revealed that US economic activity accelerated in August, exceeding market forecasts and fueling optimism for a strong third quarter. The composite PMI, a key indicator of business sentiment, rose to 55.4 from July’s reading of 55.1. A value above 50 signifies economic expansion, while a reading below 50 indicates contraction. The growth is likely to add to optimism that the economy is in good shape despite tariffs.

• The most notable surprise came from the manufacturing sector, where the PMI surged to 53.3 from 49.8, far surpassing expectations of 49.5. Similarly, the services PMI also beat forecasts, moderating slightly to 55.2 from 55.7 but still well above the anticipated 54.2.
• Still, there are reasons to be cautious about whether this will last. Much of the recent improvement was driven by companies increasing their inventories. A similar trend was seen in other areas, such as the UK, eurozone, and India, which also showed an increase in economic activity.
• Further compounding economic concerns is the potential for this new inventory buildup to exacerbate price pressures. Evidence from the latest PMI data shows that firms are already raising selling prices in response to increased costs — a trend publicly corroborated by Walmart’s announcement of impending price hikes on select products.
• While the resurgence in economic activity is positive, our focus now shifts to the consumer. We believe the key factor for continued corporate success will be their ability to protect margins, whether by passing higher costs to consumers or securing discounts from foreign suppliers. However, we will monitor closely for any signs of consumer resistance. Given the elevated risk level, we maintain our stance that investors should exercise prudence.

EU Digital Stablecoin: The European Union is accelerating its development of a digital euro, driven by a desire to maintain monetary sovereignty and compete with the United States’ progress on stablecoins. The US has recently passed the Genius Act, which facilitates the creation of US dollar-denominated stablecoins. This legislation, along with the growing dominance of private, US-backed digital currencies, has prompted the EU to expedite its own digital currency project.

• A key technical distinction between the projects lies in their underlying infrastructure. While the digital euro proposal favors public blockchain technology (such as Ethereum or Solana), which emphasizes transparency and accessibility, the anticipated US approach is expected to utilize a private, permissioned ledger.
• The move to develop a digital euro as a rival to potential US initiatives exemplifies how digital currency is becoming a new arena for global economic influence. A key economic incentive for these stablecoins is their potential to create demand for short-term government bonds. This could, in turn, facilitate the financing of mounting public debt.
• We will closely monitor the development of stablecoins, as they are becoming an integral part of the financial system. Their growth necessitates adaptation and has significant implications for both monetary and fiscal policy. This area demands attention, as it presents opportunities for new rewards but also carries the potential for unforeseen risks.

German Economy: The German economy contracted by 0.3% in the second quarter, a sharper decline than the initially reported 0.1%. This downward revision follows a strong first quarter, where robust export growth had pushed expansion to 0.3%, suggesting the recent contraction may represent a partial normalization. Nevertheless, persistent weaknesses in manufacturing and investment spending remain a concern, which will likely increase pressure on the government to introduce further stimulus measures.

H20 Chips: Nvidia, the world’s largest chipmaker, has reportedly paused production of its H20 AI chip. This move follows increased scrutiny from Chinese officials on companies buying the chips, sparking concerns about weak demand. Nvidia’s performance has been a key indicator for the broader AI boom, and its consistent ability to beat expectations has driven market sentiment. As the company prepares to report earnings next Wednesday, any perceived weakness could fuel market uncertainty. Despite this, the broader tech sector still appears to have momentum.

US Transshipments: In a bid to circumvent China’s 10% levy on US goods, American metal dealers are reportedly rerouting China-bound shipments through intermediaries like Vietnam, Mexico, and Canada. This strategy has emerged as a direct response to the tariffs, leading to a notable decline in the volume of metal exports shipped directly from the United States to China. While the full extent of this activity remains unclear, it highlights an important and evolving tactic in the ongoing trade dispute.

Global Postal Service: Postal services worldwide are halting certain international shipments to comply with a deadline for ending a key tax exemption. This follows the president’s elimination of the de minimis rule, which previously allowed low-value packages to enter the country without import tariffs. While the long-term impact is still unfolding, this change is likely to cause short-term complications and delivery delays as foreign shippers scramble to adapt to the new compliance requirements.
South-North Korea: South Korean President Lee Jae-myung is set to meet with President Trump to discuss a recent trade deal and security agreement. During the meeting, President Lee plans to urge President Trump to reopen diplomatic dialogue with North Korea. This push for renewed talks comes amidst ongoing efforts to address security concerns on the Korean Peninsula.

Chipmakers Safe: The Trump administration has decided against requiring companies that receive CHIPS Act funding to surrender equity in exchange. This decision follows the separate case of the administration offering direct aid to Intel in return for a stake. By removing this requirement, the administration is reducing a key deterrent for foreign companies considering major investments in the US, thereby strengthening the program’s economic impact.

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by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment will first explore the divisions among Fed officials regarding the path of monetary policy. We will then examine other critical market developments, including China’s clampdown on purchases of Nvidia chips, the obstacles to a Russia-Ukraine agreement, and progress on EU-US trade talks. We will conclude with an overview of additional global and domestic factors shaping the financial landscape.

Fed Divided: Policymakers were deeply divided on the path of monetary policy due to concerns surrounding tariffs. Some Fed officials expressed concern that the tariffs would lead to increased inflation. Others, however, argued that more action was needed to support the economy, citing signs of a deteriorating labor market. A third group remained undecided on whether inflation or the labor market presented a greater risk to the economy. Despite the disagreement, the majority of officials ultimately concluded that inflation posed the more significant threat.

• The disagreement among policymakers comes at a critical time, as both aspects of the central bank’s dual mandate — maximum employment and price stability — appear to be at risk. Recent revisions to job payroll data have shown significantly slower job growth than initially reported. Concurrently, a higher-than-expected monthly rise in the Producer Price Index (PPI) has fueled concerns that input prices may soon translate into higher consumer prices.
• This monetary policy uncertainty is compounded by growing concerns over the central bank’s independence, following intense presidential pressure to lower interest rates. The situation escalated on Wednesday when President Trump called for Lisa Cook to resign over allegations that she falsified loan documents. This follows the president’s previous attempt to force Fed Chair Powell to step down amid accusations of misleading Congress about renovations to the Federal Reserve building.
• We maintain our expectation for the Fed to cut rates this year, with a September move appearing increasingly probable. The upcoming jobs report will be crucial as any confirmation of slowing job growth could tilt the committee toward a cut. Conversely, further signs of labor market strength would likely cause the Fed to keep rates on hold.

China and Nvidia: Chinese officials are seeking to curb domestic companies’ reliance on NVIDIA AI chips, following controversial remarks by US Commerce Secretary Howard Lutnick. Last month, Lutnick stated that US chipmakers were withholding their highest-quality chips from China, with the goal of making the country “addicted” to American semiconductors.

• In response, Chinese regulators have begun intensifying their scrutiny of domestic firms’ US chip purchases, aiming to encourage domestic alternatives. This action is a response to ongoing US efforts to secure concessions from trading partners through tariffs and restrictions. Earlier this week, the US Treasury secretary noted that China paid the most in tariff revenue. Furthermore, the US is reportedly negotiating a deal that would force chipmakers to pay a percentage of their revenue from their China sales to the US government.
• The ongoing US-China conflict is not merely an economic competition but also a clash of narratives. Beijing seeks to avoid any perception of submission to the US, an objective that runs counter to the Trump administration’s desire to demonstrate American dominance in its trade relationships. Although this dynamic will likely result in contentious discussions, it is unlikely to derail the possibility of a comprehensive agreement.

Eurozone Surprise Growth: Economic activity in the eurozone picked up in August, according to the latest PMI data. The key business sentiment indicator registered 51.1, exceeding expectations of 50. A reading above 50 indicates economic expansion, while a reading below 50 suggests contraction. This better-than-expected growth suggests the broader eurozone economy is on firmer footing, making it likely that the ECB will refrain from lowering interest rates at its next meeting.

Russia-Ukraine: US Vice President JD Vance hinted that a potential deal to end the war in Ukraine faces two major obstacles: providing security guarantees for Ukraine and resolving Russia’s claim over Ukrainian territory it does not currently control. Russia has rejected the initial proposal, demanding to be included in any security arrangement. Meanwhile, Ukrainian President Zelensky remains opposed to ceding any territory. As diplomatic talks continue, the US has hinted at future air support for Ukraine, even as Russia intensifies its offensive.

 EU-US Trade Deal: The White House and the European Union have formally moved to implement a preliminary trade agreement, as outlined in a newly released joint statement. The agreement, which follows weeks of negotiation, links relief from US sectoral tariffs (on autos, pharmaceuticals, and semiconductors) to the EU’s meeting of specific benchmarks. A key component is a framework to address long-standing US objections to the EU’s digital services regulations. The agreement is likely to provide support to US and European stock markets.

AI Spook: Meta has reportedly paused hiring in its AI division. While the freeze has been attributed to changes in the company’s organizational planning, it follows reports that its AI initiatives have failed to deliver solid revenue and productivity gains. Investors had already expressed concern that tech firms were prioritizing capital expenditure (CAPEX) at the expense of shareholder value. This tension is particularly acute given its elevated valuation, a situation that may fuel broader skepticism toward high-spending tech firms.

Walmart Confidence: Walmart, the largest US retailer, has raised its financial guidance, signaling strong confidence in the resilience of the American consumer. This optimistic forecast comes as the company reports success in mitigating price pressures from higher tariffs. While Walmart has absorbed some of these costs and passed others on to consumers, it has cautioned that price increases may become more noticeable as it replenishes inventory. Nevertheless, Walmart’s confidence is a positive indicator for the broader economy.

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by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment will first address recent doubts about the AI boom, then examine other critical market developments, including the trade calm between the US and China, the eurozone’s pivot toward new trade partners, and a call for the resignation of an FOMC member. We will conclude with an overview of other global and domestic factors shaping the financial landscape.

AI Spook: US equities sold off sharply on Tuesday after an MIT study cast doubt on the commercial viability of generative AI. The research, which drew from a significant dataset of interviews, surveys, and deployment analyses, revealed a staggering 95% of AI pilots did not produce a meaningful boost to revenue or productivity. This finding directly challenges the high valuations of AI-focused companies, prompting the market downturn.

• However, the study suggests that the models’ poor performances stem less from their technical quality and more from flawed corporate integration. The report found that companies partnering with external AI specialists achieved a 67% success rate — double the 33% rate of those that relied solely on in-house development.
• While slow adoption cycles are typical for new technologies, the current pace raises serious questions about the tech sector’s massive capital expenditures and potential overcapacity. For context, Alphabet’s projected 2025 capex of $85 billion exceeds France’s entire military budget for 2027. This aggressive build-out of AI data centers, intended to meet anticipated demand, risks creating a significant capacity glut and fuels concerns about a brewing bubble.

• The market’s gains remain narrowly concentrated in the Magnificent 7, even as concerns over tariffs have subsided. This persistent lack of breadth heightens the market’s vulnerability to a sentiment-driven pullback. Given these concentrated risks and elevated uncertainty, we advise investors to maintain a disciplined and prudent approach to portfolio construction.

US Satisfied: The White House is leaning toward maintaining the status quo with China, its largest rival. Signaling this intent, Treasury Secretary Scott Bessent stated the US is “very happy” with the existing tariff structure. This position was reinforced last week by the administration’s decision to extend the trade deal deadline by 90 days into November, suggesting a deliberate pause to de-escalate tensions.

• The significant tariff revenue collected on Chinese imports is a major factor in the White House’s support for the status quo. These duties are the primary contributor to US import tax receipts, and available evidence suggests the financial burden is largely falling on Chinese exporters rather than American consumers.

• The current period of trade calm is a positive for the market, as it mitigates the risk of further supply chain disruption. Given the recent weakness in the Chinese economy, US trade negotiators now possess significant leverage to secure concessions. Consequently, we remain optimistic that the administration can reach an agreement, which would substantially reduce market uncertainty.

State Stablecoin: Wyoming has launched the first state-sponsored stablecoin, the Frontier Stable Token (FRNT), to cement its status as a blockchain hub and attract investment. Backed by a 102% reserve of US dollars and short-term Treasurys, FRNT will leverage blockchain technology to offer faster, cheaper transactions for businesses and consumers. The timing of its unveiling at the state’s Blockchain Symposium, coinciding with the Jackson Hole Economic Symposium, signals the industry’s aspiration to compete against the traditional financial system.

Eurozone Looking Elsewhere: ECB President Christine Lagarde has urged the EU to strengthen its relationships with non-US countries. While she affirmed the importance of the eurozone’s relationship with the US, she also stressed that the region should strive to keep its economy more export oriented. These were her first comments since the EU struck a deal with the US. Referring to the new arrangement, she also stated that she expects growth to slow due to trade uncertainty.

Economic Bellwether: Despite apparent corporate optimism from home improvement retailers about consumer health, earnings results have been mixed. Home Depot missed estimates and warned that tariffs may force price changes. In contrast, competitor Lowe’s beat estimates and raised its outlook, benefiting from its acquisition of Foundation Building Materials. This divergence may partly reflect a slowdown in housing activity, a potential sign of economic uncertainty.

Israel Call Up: The Israeli government has announced that it will call up 60,000 reservists as part of its ongoing military operations in the Gaza Strip. The decision was made two days after Hamas reportedly accepted a ceasefire agreement that closely mirrored a proposal from the previous US administration. Despite the potential for de-escalation, Israel has stated its intent to continue its offensive, citing the goal of eliminating the threat posed by Hamas. While the conflict is expected to persist, analysts believe it is unlikely to expand regionally.

Trump Broadens Attack: President Trump has called for the resignation of Federal Reserve Governor Lisa Cook following allegations that she falsified bank documents to receive favorable mortgages. This move is consistent with the president’s stated objective to reshape the Federal Open Market Committee (FOMC) with members aligned with his economic views. The demand for her resignation comes as the president intensifies his pressure on the central bank to lower interest rates at its next meeting.

Japan Government Bonds: Japan’s super-long-term government bonds have recently attracted strong foreign investment, with aggregate buying reaching a record $63 billion in recent months. This surge in demand is primarily driven by foreign investors looking to capitalize on rising interest rates, which have increased amid concerns over higher government spending. Additionally, a weaker US dollar is playing a role, as investors seek to benefit from a stronger yen, particularly if the Bank of Japan follows through with plans to tighten its monetary policy.

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by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment will begin by analyzing how a potential US government stake in Intel could signify a shift in economic models. We’ll then examine other critical market developments, including China’s economic slowdown, India’s push for stimulus, and the Democratic Party’s potential rebrand. We will conclude with an overview of other global and domestic factors shaping the financial landscape.

Intel State-Owned: The Trump administration is reportedly exploring a stake purchase in a struggling chipmaker — a move that comes after the president previously pressured the company’s CEO to resign over alleged ties to China. The potential investment would deliver a much-needed cash infusion as the company races to construct a new US-based semiconductor plant. This signals a notable shift in US economic policy, marking a departure from the traditional hands-off approach to private industry.

• The potential US investment reflects the government’s growing willingness to influence corporate operations, as evidenced earlier this year when the Trump administration secured a “golden share” in the Nippon-US Steel merger. That deal granted Washington veto power over key decisions, including worker layoffs, and signaled a more interventionist approach to domestic industry.
• US government investment in equities could bolster share prices, particularly in strategic industries. However, such intervention may also constrain corporate decision-making and potentially limit value-creating moves that are politically unpopular. As a result, investors are likely to scrutinize these companies more closely, ensuring they maintain operational efficiency despite political constraints.
• That said, we believe companies closely aligned with the government’s agenda could benefit from protective measures aimed at shielding them from foreign competition. Such policies may also help ensure these firms remain viable in the long run, offering domestic businesses a potential competitive advantage over time.

China Slowdown: The world’s second-largest economy is experiencing a widespread slowdown, with the effects of the trade war becoming increasingly apparent. Retail sales, factory activity, and fixed-asset investment have all decelerated, while the real estate sector has continued to decline. Additionally, unemployment has risen, increasing from 5.0% to 5.2%.

• The country’s sharp slowdown in growth suggests that the economy’s early resilience was short-lived, largely due to a temporary surge from businesses trying to get ahead of new tariffs.
• While this economic weakness could prompt further policy stimulus, there are clear signs that the Chinese economy may be in more serious trouble, especially since Beijing has reportedly told firms to resist absorbing the cost of tariffs.

India Stimulus: In his Independence Day speech, Prime Minister Narendra Modi pledged additional economic stimulus measures to bolster India’s self-reliance and insulate the economy from the impact of global tariffs. Among the proposed steps is a reduction in sales taxes on goods and services. His announcement comes as India and the US continue trade negotiations, with lingering disagreements over American farm and dairy product imports.

Rare Earths: China continues to solidify its stranglehold on global rare earths production, currently controlling approximately 90% of the world’s supply. Authorities have recently warned domestic firms that excessive stockpiling may result in reduced allocations, signaling tighter central control over these strategic resources. The irreplaceable role of these minerals in tech manufacturing strengthens China’s market control, exposing AI-dependent firms to serious supply chain risks.

Japan: Japan’s economy expanded for a second consecutive quarter, reducing fears of a potential recession. In the second quarter, real GDP grew by 0.3%, following an upward revision of the prior quarter’s growth. This stronger-than-expected performance is likely to pave the way for the Bank of Japan (BOJ) to consider a rate hike. A move toward tighter Japanese monetary policy, combined with sustained economic growth, would likely put downward pressure on the US dollar by strengthening the Japanese yen.

PPI Surprise: In July, supplier prices surged beyond expectations, pointing to mounting input cost pressures. The Producer Price Index (PPI) jumped to 3.3% year-over-year, up sharply from 2.3% in the prior year and significantly exceeding the 2.5% consensus forecast. A similar trend emerged in the core PPI, which climbed from 2.6% to 3.7%. The acceleration was largely fueled by trade services; excluding this category, the increase was more moderate, rising from 2.5% to 2.8%.

• Trade services are a measurement of the margins between wholesalers and retailers. They represent the change in the difference between the price that wholesalers and retailers pay for a good and the price at which they sell that same good. When this component increases, it’s a signal that wholesalers and retailers are either passing on higher input costs to their customers or widening their profit margins.
• Earlier this year, we singled out trade services as being an important indicator for understanding the “pass-through” effect of tariffs on consumers. During the pandemic, as trade services began to pick up, there was a corresponding and notable increase in consumer prices. We interpret this as firms using that period to exert their pricing power and protect profit margins in the face of rising costs.
• The biggest unknown now is whether this is a one-time event or a symptom of a longer-term problem. If trade services continue to increase, we would be very concerned that inflationary pressures could start to build, especially if households continue to show the ability to absorb them.
• That said, these surprising readings in both the PPI and employment payrolls are why we believe this is a time for prudent risk-taking as we work to understand the full impact of tariffs on the economy.

Democrat Abundance: As the party prepares for mid-term elections, a new push for deregulation is emerging as part of a broader redefinition of its platform. This shift in sentiment is partly influenced by Ezra Klein’s book, Abundance, which argues that overregulation has hindered urban progress. While not universally embraced, the book’s growing influence suggests a change in thinking, with an increasing number of policymakers advocating for less red tape. This pivot could benefit companies seeking to expand and take advantage of government programs.

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