Editor’s note: This is a collection of economic expert commentary on the U.S. and local economies. It is updated on a regular basis.

Brian Jacobsen, chief economist, Annex Wealth Management, 11/7/25:

Growth: Brought to you by the letter ‘K’

Consumer confidence is rising for households earning more than $50,000 and falling for those earning less. Earnings growth expectations are up for big companies, but down for small ones. This bull market is brought to you by the letter “K” where one branch slopes up and the other slopes down. It’s no wonder investors can be confused, but that confusion could also create the proverbial “wall of worry” that bull markets tend to climb.

Inflation: Pricing power matters

A recent headline noted that some retailers are able to raise prices more to manage tariffs than others, underscoring how unevenly companies can pass higher costs through to consumers. For investors, this matters because firms with strong pricing power can protect—or even expand—profit margins in the face of rising input costs, whether from tariffs, labor, or supply-chain pressures. Companies that can adjust prices without losing customers are better positioned to sustain earnings growth, while those with weaker pricing power may see margins squeezed and revenue momentum slow. In an environment where cost pressures are persistent and competition remains intense, pricing power is key.

Policy: Not whether, but how

Based on the oral arguments the Supreme Court heard—and the questions the justices asked—it appears that many of President Trump’s tariffs may be on thin ice. Of course, nothing is certain until the court issues its decision. Even if the tariffs are struck down, the president still has other legally tested tools for imposing tariffs, though some might result in lower rates or take longer to implement.

Looking Ahead: High and low

The media is once again abuzz about CAPE—the cyclically adjusted price-to-earnings ratio. This indicator periodically comes back into fashion, partly because its creator, Robert Shiller, earned a Nobel Prize, though not for CAPE. Its roots go back even further to Benjamin Graham, a pioneer of value investing. The key point: CAPE is a terrible market-timing tool. Relying on it too heavily would have kept investors out of the market during the 1990s and much of the post–Global Financial Crisis period—times when equities performed exceptionally well.

But what about when CAPE reaches an extreme? That’s where things get tricky. The composition of the companies included in the ratio has changed dramatically over time, making historical comparisons imperfect. Further complicating things is the change in accounting standards over the years making it hard to compare earnings across time. Yes, high CAPE values are generally associated with lower 10-year forward returns—but 10 years means 10 years, not 10 days, 10 weeks, or even 10 months. And importantly, “lower” doesn’t necessarily mean “negative.” Are prices high or are the “cyclically adjusted earnings” of the past too low and not indicative of where they will be in the future? A single ratio cannot answer that question. Deep analysis is more important than any given number.

———

Brian Jacobsen, chief economist, Annex Wealth Management, 10/31/25:

Growth: Confirmation bias run amok

When reliable data is scarce, prior beliefs tend to persist. While government statistics offer the most comprehensive and dependable insights, alternative sources—though less robust—are still available. For example, ADP’s job numbers suggest the economy gained traction in September even as the Conference Board’s Consumer Confidence index painted a less optimistic picture. Until a clear trend emerges or official data provides confirmation, people will likely cherry-pick whichever figures best support their existing views.

Inflation: No services spillover, yet

A few years ago, the San Francisco Federal Reserve estimated that only about 11% of consumer spending is directly or indirectly tied to imports. Tariffs do affect consumer prices, but likely less than many assume. Goods inflation remains above trend and shows no signs of easing, yet services account for more than three times the spending on goods. This past summer, Fed officials were surprised by indications of rising service-sector inflation, but September data suggests that concern may have been a false alarm.

Policy: Short shelf-life

Fiscal, monetary, and trade policies can quickly change. The government shutdown is affecting travel and other government functions, but an agreement could be reached quickly. Chair Powell said a December rate cut is not a foregone conclusion, but it’s also not a “definitely not.” The U.S.-China trade truce is encouraging, but it can also change on a dime. Some policies spark investor optimism, while others fuel concern. When investors talk about “fundamentals,” they often mean earnings or cash flow, but government policy is a powerful fundamental force shaping markets.

Looking Ahead: Un-seasonality

Historical data since 1926 shows September as the only month with a negative average return, while November and December typically post the highest averages. But seasonal patterns can be misleading. For instance, this past September delivered its strongest performance since 2013. In reality, markets rarely deliver “average” returns—they’re usually better or worse. Trading based on seasonality can be costly, both in transaction fees and in misjudging markets that turn out to be unseasonably hot or cold.

—————–

Brian Jacobsen, chief economist, Annex Wealth Management, 10/29/25:

The end is near, for QT. Rather than risk a blow-up in short-term debt markets, it only made sense to stop QT. There were already some signs of stress, so there was little to be gained in pushing QT further.

In a head nod to the dearth of data, the Fed had to qualify the entire statement by saying “available indicators,” because there aren’t a lot of them with the government shutdown. The dissents weren’t surprising, so this was a no surprise kind of statement.

Chair Powell will likely do the verbal equivalent of shrugging his shoulders during the press conference if asked about future cuts.

———————

Eric Kelley, chief investment officer, UMB Private Wealth Management, 10/24/25:

Economic analysis of Q3 2025: Falling leaves and rising markets

At the time of publish, a federal budget impasse and government shutdown are underway. The market is unphased by the current budget impasse, and we do not foresee needing to adjust our forecasts or strategies because of the wranglings in D.C.

The third quarter of 2025 was marked by improving market sentiment, driven by growing confidence that the Fed will initiate an ongoing easing campaign throughout year-end and into 2026. Inflation continued to build as new tariffs were implemented, but concern over the labor market pushed the Fed into a “dovish” narrative, igniting hopes for a more stimulative rate environment for the foreseeable future.

GDP data is a mixed bag

The second quarter of 2025 enjoyed a strong burst of economic activity with GDP growth being revised up to a robust 3.8% (annualized). Much of this was likely due to front-loading of import activity in anticipation of the impending tariff program. It is broadly believed that the economy is likely to slow to below-average growth rates (below 2%) for the remainder of the year. Consumption remains steady, albeit concentrated amongst upper-income households. Median and lower-income households appear to be under increasing pressure from both inflation and weakening job prospects.

Tariff fears slowly abating

As summer progressed, it became clear the tariff package would land with an average rate of around 15-17%. Contrary to initial concerns, the world quickly adapted, and confidence grew in a smoothly functioning global economy despite a historic shift in trade policy. The emerging clarity about tariffs helped ignite a strong jolt of optimism amongst market participants, providing a nice tailwind for stock prices throughout the third quarter.

Inflation uncertainty continues, but the Fed isn’t concerned

Inflation data is all well above Fed targets, after grinding higher throughout the summer months. Consumer Price Index (CPI) and Personal Consumption Expenditure (PCE) measures both ended September in the 3% range versus a long-term target of 2%.

As the full tariff package comes to fruition in the coming months, there is consensus that inflation will continue to increase early next year, but also that it will taper off and move lower throughout the second half of 2026. Given that tariff-based inflation is a one-time adjustment, the Fed believes that inflation data will crest and begin to drift lower naturally, without any need for higher interest rates.

Labor market showing consistent signs of weakness

Over the last several months, the monthly payrolls data weakened significantly, with several downward revisions of previous months’ data. Currently, it appears that the U.S. labor market has ground nearly to a halt, with no meaningful increase in payrolls for several months.

Monthly payroll growth is in a range that would normally be associated with a recession. However, we have not seen a meaningful increase in jobless claims, causing this period to be referred to as a “no hiring, no firing” cycle. This is a curiously unique situation, likely caused by ongoing evolution of the overall labor force, largely due to immigration restrictions and discouraged workers dropping out of the job hunt.

Strength in the S&P

Riding this wave of increasing clarity around both tariffs and rate expectations, the S&P posted a powerful 8.11% return for the third quarter, which is a truly amazing result in an environment with so many challenging uncertainties. Year-to-date returns are around +11% for the S&P at the time of this update, which is well above early estimates for the calendar year 2025. Earnings growth remains healthy, but also heavily concentrated in the group of companies that are focused on the artificial intelligence (AI) arms race.

Looking ahead through 2026

We expect the Fed to continue focusing on softening economic fundamentals to rationalize further rate cuts. We expect one more cut (to 4.00%) this year and two or three more in 2026. Lower rates should help businesses feel more confident heading into 2026, which could improve the outlook for broader capital expenditures (not just in the AI space) – bolstering business activity, jobs and the overall economy.

The current environment, with economic growth based primarily on upper-income spending and AI investment, is not sustainable long-term. The current market thesis posts that these two forces will sustain activity in the short-term, until lower interest rates help stabilize the average household. This should put economic growth on a broader, sustainable trajectory over the longer-term.

——————–

Brian Jacobsen, chief economist, Annex Wealth Management, 10/24/25:

Growth: Alternative reality

Without official government data releases, it’s hard to gauge the health of the economy. There are private sector sources as an alternative, but they don’t have the same depth and breadth of coverage. Thankfully we have earnings season where we’re getting a boots-on-the-ground assessment of what’s going on. There are mixed messages, as usual, but once again it looks like corporate America is really good at rolling with the punches.

Inflation: Exciting, but irrelevant

It was nice to finally get some economic data. The consumer price index for September was the last piece of the puzzle to get a picture of 2026 cost of living adjustments for Social Security benefits. For the Fed, the inflation number might not matter much. Right now, Fed officials are more concerned about the labor market than about inflation. Without any evidence to the contrary, there’s nothing to really change their minds about cutting.

Policy: Still a stalemate

The federal government has been shut down for more than three weeks, and the U.S. Senate has repeatedly failed to advance funding bills — including three separate attempts to pay federal workers during the shutdown. The main point of contention: Democrats insist on extending Affordable Care Act subsidies before reopening the government, while Republicans refuse to negotiate until it’s open. There are signs of cracks in both sides’ resolve. Defectors on each side could pave the way for smaller bills — such as paying essential workers — while the President expands the definition of who is considered essential. That could lead to a partial reopening, or a shutdown in name only.

Looking Ahead: Any price won’t do

When something is sought after, but in short supply, the price goes up. Maybe that’s the story of growth stocks, and especially tech: when growth is scarce it commands a premium price. At some point, the price can get too rich. Some of the volatility lately may be investors thinking that they should try to find growth at a reasonable price instead of growth at any price.

—————–

Brian Jacobsen, chief economist, Annex Wealth Management, 10/17/25:

Growth: 50 shades of Beige

The Fed’s Beige Book certainly didn’t paint a rosy picture for the U.S., but it also wasn’t bleak. Three of the 12 Federal Reserve Districts reported slight to modest growth, five reported no change, and four noted slowing. It’s not a rising or falling tide lifting or sinking all boats. Each state, industry, company, and individual has its own exposures to the various trade or geopolitical changes happening. As medical disclaimers often say, “Individual results may vary.”

Inflation: Another day, another data delay

While there are lots of alternatives to government provided jobs numbers, there aren’t nearly as many alternatives to the government’s inflation numbers. Each of us can see and feel inflation when we buy things, but those individual impressions aren’t a good guide for setting monetary policy. The Fed sets policy for the country as a whole, not for individuals. Generally, private-sector data is showing what we all probably already knew: imported goods prices are continuing to rise. But they’re not likely rising fast enough or far enough to worry the Fed–except for the optics around cutting rates while inflation is moving higher. Because the consumer price index is essential for determining the cost of living adjustment for Social Security benefits, we’ll at least get a little sip of that data during this data drought.

Policy: Locked in

Chair Powell pretty much eliminated all uncertainty about whether the Fed will cut when it meets next October 28-29. The labor market looked like it was on a downward trajectory when the Fed cut in September and they haven’t seen any evidence to suggest that trend has changed. Chair Powell also said quantitative tightening (the shrinking of the Fed’s balance sheet) might end within a few months. If the government shutdown ends and we get a deluge of data that has been pent up showing a weaker labor market, instead of delivering a jumbo-sized rate cut, the Fed might just speed the day they stop shrinking its balance sheet.

Looking Ahead: Canaries and cockroaches

Big moves in high yield credit spreads are often thought of as the proverbial canary in the coal mine. If the canary dies, miners know they should probably get out of the coal mine. Jamie Dimon said some high profile defaults could be like a cockroach: when you see one, you know there’s not just one. Was he talking about his company specifically or the broader banking system? This past week, it looked like a handful of smaller banks had some cockroaches crawling around in their loan books. It’s better to have good oversight and regular treatments to keep cockroaches from coming in instead of having to have an exterminator visit to deal with an infestation. But banks make loan loss provisions and typically have plenty of capital to keep the cockroaches from causing structural damage. Based on earnings and data so far, it looks like this isn’t an infestation and the canary is probably passed out and not dead.

————–

Beige Book, Federal Reserve Bank of Chicago – 10/15/25:

Summary of economic activity

Economic activity in the Seventh District was little changed over the reporting period, and contacts expected a slight decrease in activity over the next year. Consumer spending increased modestly; construction and real estate activity increased slightly; employment was flat; nonbusiness contacts saw no change in activity; business spending declined slightly; and manufacturing activity declined modestly. Prices rose moderately, wages were up modestly, and financial conditions loosened slightly. Prospects for 2025 farm income were unchanged.

Labor markets

Employment was flat over the reporting period, though contacts expected a slight pickup over the next 12 months. Reports on labor market conditions continued to be mixed. Job turnover was low, and contacts across many industries observed softening labor market conditions. An employment placement agency reported a continued decline in demand from manufacturers, and one contact in state government observed that previously announced layoffs in agricultural machinery manufacturing had been completed. A retail industry analyst expected that hiring for the holiday season would be weaker than last year. A few contacts in manufacturing and construction said they were looking to hire new workers. One noted that fear of immigration enforcement was reducing labor availability. Another contact said that revoked visas for workers at a local factory created the need to rehire for those positions. Wages and benefits costs were up modestly overall, and many contacts cited increases in health insurance premiums.

Prices

Prices rose moderately in late August and September and contacts expected a similar pace of growth over the next 12 months. Nonlabor input costs rose moderately, with contacts highlighting higher costs for energy and raw materials like aluminum, copper, and steel. Manufacturing contacts attributed the increases in metals prices to tariffs. In contrast, several contacts in the construction industry noted no change in input prices in recent weeks. Overall, producer and consumer prices rose moderately. One retail industry analyst said that, in general, retailers were trying to hold off passing tariff-related cost increases on to consumers for as long as possible, though several smaller retailers reported already raising prices because of tariffs.

Consumer spending

Consumer spending increased modestly over the reporting period. Contacts reported a healthy back-to-school shopping season as well as strong increases in spending on appliances, computers, and landscaping. However, spending on other consumer electronics and building materials declined some. Leisure and hospitality sales were mixed, with softness in some travel-related categories, including airlines and hotels, but increased spending at restaurants in the fast food, fast casual, and family dining segments. New light vehicle sales were brisk, reflecting a combination of strong underlying demand and the end of tax incentives for electric vehicle purchases. Used vehicle sales remained steady, though dealerships located in low-to-moderate income communities reported softer demand.

Business spending

Business spending declined slightly in late August and September. Capital expenditures fell slightly and expectations for the coming year also decreased. Demand for truck transportation edged down, though freight rates increased slightly. One contact in the trucking industry called current conditions “recession-like.” Retail inventories were lean, stocks of vehicles were lower, and manufacturing inventories were a little high.

Construction and real estate

Construction and real estate activity increased slightly on balance over the reporting period. Residential construction edged up. Residential real estate activity was unchanged; prices were flat and rents increased modestly. One contact felt that the single-family market had shifted from being a seller’s market to “barely a seller’s market” amidst an increase in inventory and stable demand. Contacts noted that in the multifamily sector rent concessions for new tenants had become more common. Nonresidential construction increased slightly as demand remained robust for data centers and health care facilities. Commercial real estate activity also increased slightly. Leasing activity in the office sector picked up and demand from restaurant groups remained solid. Prices and rents were unchanged. Contacts noted that sellers have brought down asking prices for properties, opening the door for some movement in the market. Vacancy rates and the availability of sublease space both grew slightly. Some contacts indicated that while industrial vacancy rates were low the space that is available is sitting longer. Separately, more warehouse inventory was available.

Manufacturing

Manufacturing demand declined modestly in late August and September. Steel orders were flat overall. A few contacts noted some reshoring of steel production. Fabricated metals demand was unchanged on balance, as higher sales to a range of sectors was offset by lower sales to the construction and automotive industries. Machinery orders decreased moderately, driven by a decline in demand from the auto sector. Auto production was down modestly, while heavy truck production was flat.

Banking and finance

Financial conditions loosened slightly in late August and September. Bond and equity values rose a bit, while volatility remained unchanged. Business loan demand decreased slightly on net, with one contact citing a decline in acquisition activity. Business loan quality declined modestly, as multiple contacts noted weaknesses among suppliers in the auto industry. Business loan rates moved down, but terms tightened. In the consumer sector, loan demand increased slightly, with a few contacts noting a pickup in mortgage refinancing. Loan quality remained flat and rates edged down, but terms tightened slightly.

Agriculture

Net farm income prospects for the District were unchanged over the reporting period, though elevated uncertainty continued to unsettle agricultural operators. Corn and soybean fields were in good shape across most of the District. Dry conditions assisted harvest but hurt yields in some places; in addition, crop disease trimmed yields a bit. Fruit and vegetable production was subpar for most products. Soybean prices were lower, in part due to the absence of new-crop exports to China. Corn prices were down despite strong export volumes. Cattle and hog prices increased to record territory, while milk and egg prices declined. Concerns about higher input costs for 2026 intensified due to rising fertilizer prices. Farm operations, particularly crop producers, have already cut costs, with a contact saying, “there is limited flexibility left to further reduce expenses.” Contacts noted that lack of clarity on the economic outlook was putting a damper on capital investment, such as equipment purchases and repairs.

Community conditions

Community, nonprofit, and other nonbusiness contacts reported no change in activity over the reporting period and noted ongoing uncertainty about economic conditions. State government contacts noted modest year-over-year increases in sales tax revenue. Workforce development contacts who support individuals facing barriers to employment reported that firms had become more “selective” in hiring, as existing workers were more likely to stay in their current jobs and employers weren’t as eager to fill empty positions. In planning for 2026, many nonprofit organizations anticipated the need to find new funding streams and adapt to smaller budgets. Social service contacts reported that increased operating costs, such as for insurance, combined with reduced income and donations, were causing them to think carefully about which services to prioritize.

Brian Jacobsen, chief economist, Annex Wealth Management, 10/10/25:

Tariffs

Here we go again. Trade negotiation via social media can be very disruptive to markets, but a lot can change quickly. By setting a November 1^st implementation date for tariffs, that leaves enough room to have people actually talk with each other about the issues instead of just lobbing press statements back and forth. Downside risks to growth and upside risks to inflation are now higher than they were just 12 hours ago, but those risks don’t have to become reality.

Growth: Better than nothing

With a government shutdown delaying key official data releases, the Federal Reserve’s upcoming Beige Book may be give clarity on what’s happening on the ground in America. Last year, while the jobs numbers were strong, the Beige Book was decidedly more gray. After the government’s data revisions, those anecdotes proved to be more accurate than the hard data. The Beige Book may be the golden key to see what the Fed will do when it meets next.

Inflation: Expectations versus reality

The Fed’s Minutes from its September meeting showed how some officials are more concerned about the invisible threat of inflation expectations than the somewhat more moderate inflation that’s been realized so far. Un-anchored inflation expectations could turn a temporary shock into a more persistent problem. At some point though, reality should trump the ghost of inflation future.

Policy: A nominal world

Economists seem to love debating the theoretical *real* neutral rate of interest to gauge whether monetary policy is too loose or too tight. But the Federal Reserve’s direct action is limited to setting nominal interest rates, not real rates. The real world is nominal. Maybe demographics, technological change, policy changes, savings behavior, and government debt levels have pushed the real neutral rate up or down, but the most relevant thing is whether nominal rates are too high or too low today. The rest seems overly academic. Most Fed officials at least seem to agree on the direction rates should head even if they wildly disagree about where they should eventually land.

Looking Ahead: Bulls, bears, and bees

Investing often focuses on the fight between the optimistic Bulls and the pessimistic Bears. However, the most successful strategy is to ignore this short-term drama and adopt the mindset of a Worker Bee. A worker bee consistently executes a plan, whether it’s through the euphoria of a bull market or the fear of a bear market. By remaining disciplined and focusing on long-term value, the “bee” finds opportunities to steadily build wealth in any economic climate. This steady, diligent approach outweighs attempts to profit from the volatile, emotional swings of the bull-bear battle. Be a bee.

Brian Jacobsen, chief economist, Annex Wealth Management, 10/8/25:

There’s a lot of squawking and squabbling at the Fed. Where they stand depends on whether they fear the risk they know, a slowing labor market, or the risk they don’t know, the possibility of inflation expectations moving higher.

As the government shutdown persists and data releases are postponed, the risks to growth are growing while the risks to inflation are the same as they were or falling. If September’s cut was a risk-management cut, it would be hard to argue they shouldn’t cut again in October.

Brian Jacobsen, chief economist, Annex Wealth Management, 10/3/25:

Growth: Shutdown slowdown

“What, me worry?” But there may be more than meets the eye to this government shutdown. The pain individuals feel who are furloughed should not be minimized. However, for the nation as a whole, shutdowns don’t leave a dent. What is different this time is the possibility of further employment reductions at the federal level. Being furloughed and knowing you will get backpay is very different from being laid-off and trying to find work in a “no hire, no fire” job market.

Inflation: A road to nowhere

Inflation went from 2% in early April to about 3% in August. If the government shutdown persists, we might not get the September numbers when they’re scheduled to come out on October 15th. Gasoline and agriculture prices were rising in the first half of September before retreating a bit. So, it’s likely that very little progress would be made to get inflation back towards 2%. The Fed’s fight against inflation is a long road, but right now it feels like a road to nowhere.

Policy: Flying blind

During the 2013 government shutdown, then-Federal Reserve Chairman Ben Bernanke offered, on behalf of the Federal Reserve, to pay for the Bureau of Labor Statistics’ (BLS) core economic data collection. Maybe that idea should be revisited. The Fed relies heavily on the data from all the parts of the federal government and those data releases get postponed and the collection can be put on pause. It’s not a great setup for a data-dependent Fed.

Looking Ahead: Cash is king

For individuals who might need to ride through a federal employment furlough, having a rainy day fund can be a lifesaver. For skittish investors, having a good liquidity plan can help ease some anxiety. For investors, the value of a firm comes from the cash flows it generates. The phrase “cash is king” dates back to at least the 1890s, but it seems to always be relevant.

Brian Jacobsen, chief economist, Annex Wealth Management, 9/26/25:

Growth: Silver linings emerge

Amid signs of cooling in some areas (job growth and existing home sales), pockets of resilience are shining through. U.S. new home sales soared in August to an annualized 800,000 units – the highest since early 2022 – handily beating expectations. Second quarter gross domestic product was revised up to a 3.8% annualized pace. The latest manufacturing and services PMI (purchasing manager indexes) readings dipped slightly but stayed above 50, suggesting the economy is still growing (if a bit more slowly). Even if the labor market wasn’t as solid as originally thought, that doesn’t mean it’s not going to firm up.

Inflation: Still tame

Companies are largely absorbing cost increases. With profit margins still at near record levels, they have the capacity to do so. Fed officials now openly express confidence that recent tariffs will have “only a small and short-lived effect on inflation.” We see this in practice: even industries hit directly by tariffs (like metals) are warning that raising prices too much would just destroy demand, a built-in brake on runaway inflation. Unlike during the inflation coming out of COVID lockdowns, companies can’t hide behind the excuse that “everyone else is doing it.”

Policy: Central bank cacophony

As is typical in the week following a Federal Reserve rate decision, Fed officials emerge from their “quiet period” with enthusiasm—and opinions. It’s always important to distinguish between who votes and who doesn’t. Among this year’s voters, Governor Miran stands out as the lone advocate for aggressive near-term rate cuts. Governor Bowman also supports cuts, though likely at a more measured pace. Governor Waller appears to favor a “slow and steady” approach to easing. The remaining nine voting members are striking a more cautious tone—either signaling that the latest cut may be the last, or advocating for a very gradual path forward. Cutting through the cacophony, the most probable outcome is a couple more rate cuts before year-end. But even that forecast should be held with modest conviction.

Looking Ahead: Shutdown countdown

With the end of the federal government’s fiscal year around the corner, there’s no compromise in site. A government shutdown isn’t a literal shutting down of every governmental activity. Social Security checks will still go out, Medicare will still function, interest on the debt will still get paid. There are a lot of “essential services” that will continue. National parks and museums may close. The upcoming jobs report may be delayed. Regulatory approvals can be put on hold. Workers may get furloughed–or, apparently, even let go completely, which is a new twist–but they have always gotten back pay. The market and broader macroeconomic effects of a shutdown–even lengthy ones–are often mere blips on the charts.

Brian Jacobsen, chief economist, Annex Wealth Management, 9/19/25:

Growth: A bowling ball more than a crystal ball

Published government data tells us, imperfectly, what happened in the past. It doesn’t tell us what is happening or what will happen. Just because the labor market data from May through August were weak does not mean the data for the rest of the year will be bad. Trying to stare at data without a theory or idea of what may happen next is kind of like treating a bowling ball like it’s a crystal ball. With the clouds of uncertainty of tariff, tax, and monetary policy clearing, the thing that might surprise investors the most is that when it comes to growth, maybe the worst is mostly behind us, not in front of us.

Inflation: No surge in sight

We’ve already seen some signs of tariffs showing up in prices across a range of goods, but the full impact will likely unfold gradually and unevenly over time. Most businesses are hesitant to be the first to raise prices. Rather than a sudden surge, tariff-related inflation is more likely to simmer—slow and scattered—as companies test the waters to see what pricing changes the market will tolerate. In the meantime, many will focus on improving efficiency to offset rising costs, delaying or softening the need to pass those costs on to consumers.

Policy: Stirring the pot

As expected, newly confirmed Federal Reserve Governor Miran argued for a larger cut than the rest of the Federal Open Market Committee (FOMC) delivered. He is one of 12 voting members. Even if he were to be made chair after Chair Powell’s term is up in May, that’s no guarantee that he will get to dictate policy. The chair wields a lot of power in setting the agenda of the meeting and laying out options, but the chair isn’t a dictator. At best, Miran–or any chair–would be able to stir the pot, not choose what dish is being served.

Looking Ahead: Looking for low hurdles

Market multiples can be a blunt tool for assessing value. A high price-to-earnings (P/E) ratio might suggest a stock is overpriced—or it could reflect strong growth expectations. A low P/E might signal undervaluation—or low confidence in future earnings. Understanding the context behind the numbers is essential. Today’s market shows a striking divergence: some industries are priced for aggressive growth, while others face much lower expectations. For investors, the challenge is to distinguish among what’s truly undervalued, what’s overhyped, and what could be underwhelming.

Brian Jacobsen, chief economist, Annex Wealth Management, 9/17/25:

Fed approves quarter-point interest rate cut

The Fed decision is as we expected: but by a quarter point while Miran dissents in favor of a bigger cut. In the Summary of Economic Projections, the biggest news was going from penciling in two cuts this year back in June to three cuts.

Because it’s September we get another year of projections, out to 2028. The Fed seems to think it will get everything back to targets by 2027 and take 2028 as a year to coast.

Broad economic growth is stronger than expected, inflation is a bit tamer than feared, and the labor market is decelerating faster than hoped. All in, it’s not a sign that they’re in panic-mode, nor should they be.

Miran’s dots stand out like a sore thumb, so those are going to be perceived more as signaling than any sort of indicator of where policy might actually head. Waller likely did agree with Miran about the path of rates through 2026, mostly differing in terms of how many cuts to have this year and next.

The big question now is whether Powell leans into the dovish interpretation the market has put on this or whether he pushes back against it.

—-

Brian Jacobsen, chief economist, Annex Wealth Management, 9/16/25:

Retail sales rose more than expected. There was a bounce back in spending at food services and drinking places as well as a big jump in online spending. The consumer is down, but not out.

Import prices rose 0.3% for the month. Excluding fuel, import prices rose 0.4% and a lot of that is in consumer goods. Tariffs should push import prices lower since tariffs are applied after the goods hit the port. But the weaker dollar means those prices should rise instead. In the tug-of-war between tariffs and a weaker dollar, the weaker dollar is winning out.

As the Fed meets, there will likely be a collective shrugging of the shoulders around the table as they try to figure out what this data means.

—-

Brian Jacobsen, chief economist, Annex Wealth Management, 9/12/25:

Growth: Not as strong as we thought we were

The Bureau of Labor Statistics’ preliminary benchmark revisions showed the labor market wasn’t as strong as originally thought back in March. It all likely started during the growth slowdown in spring 2024. Fewer businesses were probably starting and more were closing than the BLS originally guessed. Published data are often a very imperfect reflection of what’s actually happening. Investors care more about earnings and guidance than whether the level of employment in March 2025 was higher or lower than originally reported. Those are looking solid even if the labor market wasn’t.

Inflation: Nothing to see here, yet

The producer price index for August was better than expected and the consumer price index was in line with expectations. Neither show signs that tariff induced inflation is raging out of control. It’s more like a slow simmer. Some of it will show up in import prices, some in business costs, and some in consumer prices. The way it gets spread out–how quickly and how acutely–depends on the specific product.

Policy: Getting off on the right foot

The markets are pricing in a near certainty that the Fed will cut its policy rate on Wednesday. The market is also pretty sure this is the first of a few cuts. Don’t expect any clear signal from the Fed that it intends on starting a sequence of cuts. It will likely want to at least say it is going to keep its options open.

Looking Ahead: Mind the multiples

When searching for investment opportunities, investors should give great deference to market prices. Market prices reflect a lot of information, but they also react to flows and feelings. Even if the fundamentals generally look fine, what investors pay for those fundamentals–market multiples, or “valuations”–might not be fine. Recent growth and strong profit margins can both justify high market multiples, but those valuations can highlight vulnerabilities. A little growth hiccup or crimped margins can create risks that need to be navigated.

—-

Brian Jacobsen, chief economist, Annex Wealth Management, 9/11/25:

CPI

There’s nothing to see here, at least to inform what the Fed might do next week. Shelter price inflation is still the big driver of services inflation and we know the Fed pretty much ignores that component. Goods price deflation turned to inflation, but it’s a slow simmer higher instead of a raging fire.

Retirees are going to start caring about the inflation numbers because Social Security benefits are indexed to the change in prices during the third quarter. So far, that looks like a 2.7% cost of living adjustment for 2026. This illustrates why retirees should care a lot about the integrity of the BLS data. If there are political incentives to tilt the official readings lower, that has real dollars and cents consequences for many people. This also shows why the government would have a rough time trying to inflate its way out of its debt mess. More and more of government spending automatically increases with inflation.