4 reasons why the US economy has defied the odds

Economic Overview - The inflation-adjusted GDP for the second quarter was revised to a robust 3.8%, surpassing the previously reported 3.3% [1] - Initial jobless claims decreased to 218,000, indicating strength in the labor market [2] - Existing home sales in July rose slightly to over 4 million, reflecting ongoing demand despite economic challenges [2] Tariff Impact and Economic Resilience - Initial pessimism regarding tariffs has lessened as the actual impact has been more manageable than anticipated, with numerous negotiations and exemptions [4][5] - The AI boom is contributing positively to productivity, potentially offsetting costs associated with tariffs [5] - A new tax bill favoring capital equipment expensing has bolstered corporate profits, while a weaker dollar benefits exporters [6] Inflation and Federal Reserve Policy - Concerns about inflation are minimal, with expectations that the PCE deflator will align closely with forecasts [8] - Commodity prices, including oil and home prices, have remained stable, suggesting no imminent inflationary trends [9] - The Federal Reserve is expected to continue reducing interest rates, potentially lowering the Fed funds rate to the mid to low 3% range by next year [10] Housing Market Dynamics - Existing home sales saw a slight decline of 0.2% in August, with the median home sales price increasing by 2% to $422,600 [12] - The housing market experienced a significant price increase of 45% from 2020 to 2022, but prices are now stabilizing [13] - A decrease in mortgage rates and softening home prices may improve affordability for potential homebuyers [15] Stock Market Outlook - The current economic backdrop is viewed positively, with expectations for a continued rally in the stock market, potentially increasing by another 5% to 10% [16][17] - Historical trends suggest that October may not be a bad month for the market, especially following a stable September [19]