Resilient growth, cooling inflation, and strong earnings support markets.
Taking a closer look…
- US GDP grew at an annualized rate of 1.5%.1 This increase was propelled by resilient consumer spending, robust artificial intelligence (AI)-related technology investment, and continued demand for US goods overseas.2 The pace of growth highlights the economy’s ability to withstand challenges such as tariffs, Middle East tensions, rising energy prices and stubborn inflation.
- Inflation showed modest signs of easing in June. The US Federal Reserve's (Fed) preferred measure of inflation edged lower to 3.3%, down 0.1% from May. This metric is vital to the Fed because it strips out highly volatile food and energy prices to provide a clearer view of underlying, long-term inflation trends as policymakers seek to bring inflation back to its 2% target.3
- Consumer sentiment rose in July. Falling gasoline prices helped lift optimism across all major demographic groups despite ongoing concerns about persistent inflation.4 Consumer spending drives roughly two-thirds of US economic activity, making household confidence a powerful leading indicator of future economic growth and inflationary trends.1
- The July jobs report came in weaker than expected. Nonfarm payrolls declined by 23,000 and prior months were revised sharply lower. While the unemployment rate edged down to 4.1%, the report pointed to a cooling labor market amid higher costs, tariff pressures, and a shrinking labor force.5
- Corporate earnings remain a bright spot for investors. Second quarter earnings have been primarily driven by continued AI investment among major technology companies, elevated oil prices which boosted the energy sector, and robust sales growth from international markets. For companies in the S&P 500 Index:
- 86% have reported positive earnings above expectations.
- 76% have reported revenue above expectations.
- The annual earnings growth rate is 50.4%. If this trend continues as more companies report earnings, it will mark the highest earnings growth rate reported by the index since the second quarter of 2021and the seventh consecutive quarter of double-digit earnings growth for the index.6
Portfolio Manager, Strategic Advisers
"US corporations are enjoying a strong earnings season with major companies bringing in record-breaking profits that are easily exceeding expectations. While investor emotions and daily headlines can cause the stock market to fluctuate in the short term, a company's actual profits are the main driver of stock prices in the long run."
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For over 30 years, Strategic Advisers and its dedicated group of seasoned investment professionals have helped clients reach their financial goals. Our team of portfolio managers, with specialized areas of focus in asset allocation and specific asset classes, along with our deep quantitative and fundamental research, drive our investment selection and risk management decisions on behalf of our clients.