Positive Factors

•  Strong Earnings Growth: The S&P 500 has shown significant earnings power, driven largely by big tech companies, with earnings growth tracking to 9% and potentially reaching 10%.*
• AI Investment: Continued investment in artificial intelligence (AI) is expected to drive future productivity gains and earnings power, with companies like Meta (META) and Microsoft (MSFT) showing strong growth and capital expenditures in AI.
• Labor Market Stability: The unemployment rate has remained stable between 4.0-4.2% since May 2024, and average hourly earnings have increased by 3.9% from a year ago, outpacing inflation.*

 Concerning Factors

• Slowing U.S. Economy: The U.S. economy is clearly slowing down, with the economy temporarily rebounding in the second quarter due to reduced imports.
• Tariff Uncertainty: Ongoing tariff threats and trade policy uncertainty continue to cloud the outlook for economic and corporate profit growth, inflation, and interest rates.
• Potential for Increased Volatility: As the economy slows and more tariffs are implemented, more bouts of volatility are likely, particularly during the seasonally weak period of August and September.

* Source: LPL Financial Weekly Market Commentary 8/4/2025