The Weekly Edge

Earnings are driving markets higher. With S&P 500 estimates at record levels, can growth hold as jobs slow and margins face pressure?

From just after the global financial crisis through the high inflation of the early 2020s, the U.S. labor market has been on a generally positive trajectory.

Mortgage rates are easing, but housing remains frozen. Discover what’s keeping sales and construction from recovery in 2025.

“If you build it, he will come” is a message heard throughout the 1989 baseball classic Field of Dreams. While it has been nearly four decades since its release, the film’s key messages of the power of dreams, confidence, and purpose, offer notable parallels to the current state of the AI ecosystem. In particular, today’s massive capital investment in the infrastructure to support the expected demand for this generational technology.

This week’s Edge will look at the calls for big rate cuts given today’s inflation backdrop and how tariffs could impact economic growth.

With all the excitement in the equity market these days – Solid Q2 earnings! Silly stocks! AI mania! – it’s easy for bonds to get lost in the shuffle. The wild interest rate swings in the opening years of this decade have given way to a long period of elevated but stable yields, which has important implications for how we design bond portfolios.

The Fed, investors, and corporate America are holding their breath — waiting to see if AI can keep the economy from slipping.

Enter “silly stocks”. The past several weeks have featured meteoric rises in the stock prices of many companies with little to no hope of developing a sustained business model but are, for whatever reason, attractive to investors looking for a laugh or a thrill. To take one example, OpenDoor, a non-profitable online home purchase company, saw its stock increase by as much as 500% before it began to lose some air. More broadly, Goldman Sachs Research has identified a noticeable uptick in speculative investor behavior, eclipsed only by the bubbles that formed in the late 1990s and briefly in 2021.

This simple display of the yields of the various maturities of Treasury bonds, ranging from shortest to longest, was once lauded as a reliable recession indicator but is now somewhat derided as a false prophet of doom.

Hiring is slowing. Home prices are dipping. Real consumer spending is negative. And yet, markets are at all-time highs. Why aren’t investors more concerned, and what could change that?