Economic Outlook - The U.S. economy is projected to grow by 1.8% in 2023, an increase from the previous forecast of 1.6%, and is expected to grow by 1.5% in 2024 [1] - The global economy is expected to grow by 3.2% in 2023, up from 2.9% previously forecasted, with a stable growth forecast of 2.9% for 2024 [1] Federal Reserve Insights - U.S. rate futures indicate an 89.8% probability of a 25 basis point rate cut at the next FOMC meeting [2] - Fed officials express differing views on interest rate cuts, with some advocating for aggressive cuts to protect the labor market while others caution against further reductions due to inflation concerns [3] Stock Market Performance - Wall Street's main indexes closed higher, with the S&P 500, Dow, and Nasdaq 100 reaching new record highs [4] - Nvidia announced plans to invest up to $100 billion in OpenAI, leading to a more than 3% increase in its stock [4] - Teradyne's stock surged over 12% after a price target upgrade, while Applied Materials rose over 5% following an upgrade from Morgan Stanley [4] Economic Data and Corporate Earnings - Investors are focused on upcoming speeches from Fed officials and preliminary U.S. purchasing managers' surveys, with expectations for the September S&P Global Manufacturing PMI at 52.2 and Services PMI at 54.0 [6] - The U.S. Richmond Fed Manufacturing Index is anticipated to improve to -5 in September from -7 [7] - Micron Technology and AutoZone are set to release quarterly results today [7] European Market Developments - The Euro Stoxx 50 Index rose by 0.64% as positive PMI data supported market sentiment [8] - Eurozone's Composite PMI for September was reported at 51.2, exceeding expectations, while Manufacturing PMI was weaker at 49.5 [10] China Market Updates - China's Shanghai Composite Index closed slightly lower, with bank stocks providing some support against profit-taking in the tech sector [12] - The People's Bank of China plans to maintain liquidity and support economic recovery, while a new financing instrument is expected to direct 500 billion yuan ($70.3 billion) to stimulate investment [12]

Core Insights - Small business owners are entering the last quarter of 2025 with decreased confidence in profit growth expectations, with only 49% expecting an increase compared to 55% in 2024, reflecting ongoing uncertainties in demand, inflation, policy, and costs [2][3] Business Confidence - The percentage of business owners expecting no change in profits has risen from 27% to 35%, indicating growing concerns about growth [3] - There is a slight decrease in the expectation of profit shortfalls at year-end, with 16% anticipating shortfalls compared to 18% last year [3] Investment Spending - Business investment spending remains flat across key areas, including customer acquisition, product and service development, equipment/technology, hiring and retaining, and risk management [4] - A notable 3% increase in hiring and retraining employees has been reported [5] Hiring Plans - The intention to hire remains stable, but the number of employees businesses plan to hire has increased, with 13% of business owners planning to hire 10 or more new workers, and 12% planning to hire six to ten new employees, both up 3% from last year [6] - The percentage of employers planning to hire just one to five new employees has decreased by 5% [7] - A significant 26% of respondents indicated they do not need to hire, and 18% cannot afford to, consistent with 2024 figures [8] Hiring Environment - The difficulty in hiring has decreased, with only 8% of owners stating they are not hiring due to challenges in finding employees, down from 15% last year [9]

Core Insights - Major US bankers expressed optimism about consumer behavior and their earnings, despite uncertainties regarding the future of the US economy [1][4] - A significant revision in job growth data revealed nearly one million fewer jobs added than previously reported, raising concerns about economic strength [2][3] Company Insights - JPMorgan Chase CEO Jamie Dimon acknowledged the economy is weakening, highlighting the importance of the recent payroll revision [3] - Despite Dimon's concerns, JPMorgan's co-head of commercial and investment banking, Doug Petno, reported strong market activity and anticipated a rise in revenue from investment banking and trading in Q3 [5] - Bank of America CFO Alastair Borthwick also projected a positive outlook for investment banking in the upcoming quarter [6] Industry Trends - Wall Street banks have experienced a rally this year, driven by high asset prices and increased corporate activity in debt issuance and mergers [7] - Shares of major banks, including JPMorgan, Citigroup, Wells Fargo, Bank of America, and Goldman Sachs, have risen between 15% and 38% this year, outperforming major indexes [8]

Core Viewpoint - Small-cap U.S. stocks may be experiencing a resurgence after a prolonged period of underperformance, with recent data indicating potential positive trends for small-cap investors [1] Performance Summary - The iShares Russell 2000 ETF (IWM) has increased by 6.3% over the past month, compared to a 2% gain in the SPDR S&P 500 ETF Trust (SPY) [2] - Year-to-date, SPY is up approximately 10%, while IWM has advanced about 5.7% [2] - Early-year weakness in small caps was largely attributed to President Trump's tariff announcements, which adversely affected smaller companies [2] Market Dynamics - Bank of America's client flow data indicates near-record demand for small-cap stocks, with clients purchasing $1.5 billion worth of small and micro-cap stocks and ETFs in the past week [3] - The Federal Reserve is expected to cut interest rates in September, with a 97.6% probability of a 25-basis point cut, which could benefit small-cap stocks and ETFs [4] Earnings Analysis - For the small-cap S&P 600 index, Q2 earnings are up 8.6% year-over-year, with revenues increasing by 3.4% [5] - 61.1% of small-cap companies beat EPS estimates, and 72.4% exceeded revenue estimates [5] - In comparison, S&P 500 companies reported a 12.4% increase in earnings and 6.0% higher revenues, with 79.9% beating EPS estimates [6] Valuation Insights - The Russell 2000 is currently trading at a P/E ratio of 32.75, up from 27.79 a year ago, indicating that small caps are not cheap and may be overvalued [8][9] - The Nasdaq 100 Index has a P/E ratio of 32.97, while the S&P 500 Index is at 25.15, reflecting a relative valuation perspective [9] Economic Context - U.S. GDP grew by 3.3% in Q2 2025, rebounding from a 0.5% decline in Q1, driven by stronger consumer spending and private investment [10] - Job openings fell to 7.181 million in July, below expectations, which may signal potential weakness in the labor market [11] Investment Opportunities - Value and blend small-cap ETFs have outperformed growth ETFs over the past month, with notable performers including: - Invesco S&P SmallCap 600 Pure Value ETF (RZV) – Up 11.0% - Invesco S&P SmallCap Value with Momentum ETF (XSVM) – Up 9.9% - iShares US Small Cap Value Factor ETF (SVAL) – Up 9.1% [12]

The seasonality aspect is something we talk about post Labor Day a lot because since the 1950s it has been depending on time frame either the worst or one of the worst. If you juxtapose that with all of the market catalyst that we are anticipating for the coming few weeks. Do we think this is a weaker setup that deserves paying more attention to this time around.Uh I think most likely yes. I mean you know why do we have that seasonality. People people go away they go on vacation.They take a few weeks and th ...

Economic Outlook & Monetary Policy - The Fed previously adopted a "wait and see" approach regarding tariffs, but now believes their impact is likely to be a one-off event [2] - The market anticipates a potential softening of the labor market, evidenced by labor market revisions [4] - The Fed's policy decisions are influenced by revisions to employment numbers and forecasts of the labor market's future trajectory [8] - The Fed is reducing its balance sheet and is closely monitoring markets for disruptions, with the pace potentially slowing if the economy weakens [12][13] Labor Market Dynamics - A significant portion, approaching half, of the unemployed have been out of work for 15 weeks or more, indicating a core group facing difficulty in finding employment [9] - There are concerns that the job market could deteriorate, particularly when considering unemployment rates for teenagers and those in their early 20s [10] - The impact of technology on the job market is still uncertain, with conflicting reports on its effects on coding and other opportunities [11] Inflation & Interest Rates - The Fed is closer to full employment than its inflation target, leading to a cautious approach of holding rates at a slightly restrictive level [6] - The market anticipates that PCE data will not show a significant flare-up in inflation [7] - The Fed is becoming more forward-leaning on interest rate cuts [9]

Summary of Deutsche Bank Group Research on Japan Economic Perspectives Industry/Company Involved - **Industry**: Japanese Economy - **Company**: Deutsche Bank Group Key Points and Arguments Economic Growth Forecasts - The growth forecast for fiscal 2025 has been revised upward from 0.6% to 1.0% based on 2Q 2025 GDP figures, which showed a real GDP growth rate of 1.0% saar, exceeding market consensus of 0.3% [4][5] - The forecast for fiscal 2026 has been revised downward from 1.1% to 0.9% [4][5] - Growth forecasts continue to exceed consensus estimates [5] Tariff Negotiations and Economic Impact - Reciprocal tariffs with the US will be raised to 15%, while tariffs on automobiles will be lowered [4][9] - The impact of the US tariff increase on the real economy has been limited so far, with no significant change in export volumes to the US [10] - The expected impact on growth rates due to tariff changes is -0.1% for fiscal 2025 and 2026 [9] Inflation and Consumption Trends - Despite high inflation, real private consumption is on a moderate upward trend, primarily due to increases in real employee compensation [15] - Real employee compensation remains below pre-pandemic levels, with a significant negative real wage gap of about -4% in 2Q 2025 [15][23] - Inflation is expected to decelerate moderately but is unlikely to fall significantly below 2% [23] Monetary Policy Outlook - No significant changes in the Bank of Japan's (BoJ) stance on interest rate hikes are expected unless Takaichi becomes prime minister [4][46] - An interest rate hike is anticipated in October, influenced by the political calendar and economic measures [46][47] Political Landscape and Future Cooperation - The political situation will be influenced by the outcome of the Liberal Democratic Party (LDP) presidential election, with potential cooperation with opposition parties depending on the outcome [38][42] - If Prime Minister Ishiba remains in office, cooperation with the Japan Innovation Party (Ishin) or the Constitutional Democratic Party (CDP) is likely [38][42] Fiscal Policy Uncertainty - High uncertainty exists regarding future economic measures, with a placeholder assumption of a supplementary budget of about 15 trillion yen [34] - Further increases in defense spending sought by the US government are not reflected in the current economic outlook [34] Employment and Wage Dynamics - The number of employees has increased at an annual rate of about 0.7-0.8%, contributing to the rise in real employee compensation [15] - Nominal wage increases of at least 3% are deemed necessary to address the negative real wage gap [15] Long-term Economic Policy Trends - The long-term trend in economic policy is shifting from monetary policy to fiscal policy, focusing more on household-oriented policies rather than corporate-oriented ones [45][42] Other Important Content - The presence of a Liberal Democratic Party presidential election will significantly influence future political cooperation and economic policy direction [38][42] - The economic measures and their scale will be critical in shaping the economic outlook, with potential implications for fiscal policy and public sentiment regarding inflation and consumption [34][23]

Monetary Policy Stance - The policy rate is 100 basis points closer to neutral than a year ago [2] - Policy is not on a preset course and may warrant adjusting [2] - Decisions are based solely on data assessment and its implications for the economic outlook and balance of risks [3] Economic Outlook & Risk Assessment - Near-term inflation risks are tilted to the upside, and employment risks to the downside [1] - The framework calls for balancing both sides of the dual mandate (inflation and employment) [1] - The stability of the unemployment rate allows for careful consideration of policy changes [2]

Monetary Policy Response to Stagflation - The Federal Reserve faces the challenge of responding to stagflationary shocks, such as those potentially caused by tariffs, which have both inflationary and supply-side effects [1] - The Fed aims to mitigate secondary impacts of tariffs, including wage-price spirals and increased production costs for domestic manufacturers due to tariffs on parts, components, supplies, and intermediate goods [1] - Determining which price increases are transitory and which require a policy response is a key task for the Fed [2] Data Dependency and Economic Outlook - Future monetary policy decisions depend on incoming economic data, particularly inflation reports, to gain clarity [3][4] - Strong economic data with inflation trending downwards would support the Fed's decision to lower interest rates to a settling point [3]

Economic Outlook - The Wall Street Journal (WSJ) reporters are analyzing the current economic situation and future expectations [1]