The U.S. economy remains on generally firm footing.  Strong follow-through in 2Q’25 on the heels of post- “Liberation Day” uncertainty, coupled with organic (e.g., capex, consumer spending) and fiscal (e.g., lower taxes) lifts have buoyed investors’ optimism. The underpinnings of the bull market appear intact. Cracks have begun to emerge, however. Take the disappointing August non-farm payrolls as case-in-point. Given Fed chair Jay Powell’s speech at the Kansas City Fed’s annual retreat in Jackson Hole emphasizing a shift in the Committee’s principal point of concern from inflation to employment, it can be taken that the Committee will move to cut the target policy rate at their mid-September meeting.  If policymakers remain responsive, not allowing tariff-related price pressures or the structural tightening of the labor market to become restrictive, the economy should be healthy enough to prolong the earnings cycle and, in turn, the bull market into 2026.  Investors are wise to continue to monitor developments on this front closely.  One exercise we have long relied on is our monthly Market Balance Sheet in which we categorize 16 broad measures of market health as either an Asset or a Liability.  The resulting measure of “Shareholders’ Equity” (SE) (we prefer the weighted construction) jumped to +10 in August from +6 in July as we reclassified Fiscal Policy as an Asset.  A weighted +10 reading of SE is now well above the +4.3 long-term average.  We remain bullish. 

We do see market leadership continuing to evolve, however, against a shifting thematic landscape:

1. While De-Globalization remains an important consideration for corporate operators and investors alike, we are – for a moment – enjoying a quieter period relative the trade turmoil, currency debasement-related volatility, and geopolitical tension which characterized the Trump Administration’s First 100 Days policy rollout.  (Of course, we are only ever one Tweet away from humility.)  Thematically, within the Strategas Macro Thematic Opportunities ETF (SAMT), we are focused on the implications – i.e., the winners and losers – emerging from the breakdown and structural re-organization of long-held and long relied upon geopolitical operating conventions. 

2. Beyond the training of large language models (LLMs) and the construction of seemingly infinite compute capacity, Artificial Intelligence shows early signs of delivering on the contextual and inference-driven promise of Agentic Productivity[3] – by our lights – the fascinating fourth chapter of the Technology Revolution which began with Connectivity & Commerce in the late-’90s, became ubiquitous on the back of Mobile in the late-’00s before descending, most recently, into the Content Wars between traditional media and the creator insurgency.  Investors would be wise to divorce themselves from the notion that the mega-cap hyper-scalers are the only players in the A.I. game.  In the roughly thirty-year journey that defines the modern Technology Revolution, two gnawing tensions have co-existed with innovation: 1) if the product is free, you’re the product; and 2) the benefits (e.g., productivity, savings, etc.) need, ultimately, to accrue to the consumers of new tech not just (financially) to the providers.  These touchpoints seem to be bubbling closer to the surface.

3. Looking ahead, it is difficult to not be drawn to (and bullish on) the converging catalysts of the forthcoming Consumption Wave.  Next year, the U.S. will celebrate its Sestercentennial[1] while hosting (along with Canada & Mexico) the FIFA World Cup amid a tax cut-induced capex and consumer binge.  As Strategas chairman Jason Trennert posited in recent thought piece[2], “how this impacts inflation and the long-end of the yield curve in the future is anyone’s guess, but in the meantime, some of the industries that have not participated in our current bounty – e.g. homebuilders, trucking, construction, and transportation – are poised to strengthen.” Regardless of one’s political leanings or thoughts on the One Big Beautiful Bill (OBBB) the legislation not only eliminates taxes on tips and overtime, increases the small business tax deduction, increases and makes permanent the Qualified Business Income, and allows for 100% immediate expensing for new investments in factories and production facilities, it sets the start of 2026 up for a robust tax refund season.  All in, the bright lights suggest one heck of a party in the USA.

With a thematic rotation underway, equity markets have the requisite support to move higher from current, already record, levels and investors have sufficient tools to harness these trends with specificity.  Elevated multiples and interest rate uncertainty could introduce a bout of volatility before the positive impacts of tax cuts and deregulation shore-up the foundation bulls hope will carry the market into 2026.  We have evolved allocations in our thematic opportunities in our portfolio to account for this shift across four themes: 1) De-Globalization; 2) Artificial Intelligence; 3) the Industrial Power Renaissance; and, 4) Cash Flow Aristocrats and added a fifth, 5) 2026 Consumer Wave.  As they say, “all good   things must come to an end.” But, it would appear, not just yet.  The year-end push begins now.  If we can be helpful to you and your team, please do not hesitate to reach out.