The Good

The U.S. Consumer Continues to be Resilient

Despite tighter financial conditions, U.S. consumer strength continues to buoy the economy. Employment remains high, wages have held up, and the consumer has absorbed inflationary pressures better than expected. This resilience has been crucial in supporting ongoing economic growth in 2025.

Resilient S&P 500 Earnings

Despite some evidence of slowing growth, corporate earnings have remained robust. We believe that will continue in 2025 and 2026 because A) growth won’t become a structural headwind on earnings, and B) corporations still have ample room to increase productivity and reduce costs.

The market is expecting annual earnings growth of ~13% in 2026.​

The Bad

Fed Policy Error

The Fed paused rate cuts after a historic tightening cycle. While bonds have responded more favorably to the pause this year, the longer the Fed stays on hold, the more uncertainty builds around the timing and strength of economic reacceleration. We’ll see what the recent dovish commentary will bring to the market.

Tariffs & Policy Uncertainty Add to Market Jitters

With trade tensions heating up and the 2024 election cycle still casting a shadow, renewed tariffs and unclear policy direction have emerged as headwinds. Business confidence and capital spending could be at risk if policy noise escalates further. 

The Ugly

Slowing Economic Growth

When it comes to the economy, it’s all about growth. We believe that investors don't need to see a significant increase in recession risk to cause a substantial pullback in stocks; genuine growth concerns can be enough, given current market valuations. The bottom line is to focus on growth, as slowing growth is likely to halt any rally.

The Labor Market is Seeing some “Cracks”

The balance of risks has shifted more towards failing on the employment side of the dual mandate than the inflation side There has never been a recession that did not witness a material increase in the unemployment rate, which remains “full employment.” But cracks have started to form over the past few quarters. Simply said, if employment and wage growth slows, so should the growth rate of the economy. 

We recently completed our mid-year investment committee meeting and wanted to share with you a recap of the year and our views going forward.

We recently completed our mid-year investment committee meeting and wanted to share with you a recap of the year and our views going forward.

We recently completed our first investment committee of 2023 and wanted to share our new investment themes. These tactical themes are being implemented throughout our investment models.

Be sure to come back and check out our latest Clarus Insights!