INSIGHTS

  • Manager Perspective

US Outlook—Resilient Fundamentals Amid Crosscurrents

Positives

  • Strong Earnings: Second-quarter S&P 500 earnings surpassed expectations, with revenues rising 5.94% and earnings increasing 11.38%.

  • Tariffs Priced In: Markets have largely absorbed the impact of tariff policy. Credit spreads are back to March levels, and the VIX, a barometer for market uncertainty, is low—indicating stability. Markets are pricing in a ~15% tariff hit, with a one-time inflation bump expected.

  • Tax Relief: Recent tax policy removed a stealth tax increase, providing relief—especially to lower-income consumers. Funding remains up for debate, but the near-term stimulus is clear.

Angus Schaal
C. Angus Schaal, CFP®

Senior Managing Director

Amy Bush
Amy Bush, CFA

Chief Investment Officer

  • Fed Success: Inflation has fallen from 9% to under 3% without a recession. While the job market could soften, it has remained impressively resilient through tough macro conditions.

  • Deregulation Tailwind: Regulatory easing, particularly in banking and energy, may spur more lending to private companies. Rolling back post-2008 rules could boost business activity.

  • Pro-M&A Stance: The administration supports mergers and acquisitions, which can help unlock efficiencies.

  • AI & Productivity: AI adoption is driving a major productivity wave. U.S. companies—already world-class—stand to benefit the most.

  • CapEx Cycle Underway: Capital expenditures are accelerating, supported by full expensing, AI, onshoring, deregulation, and tariff incentives. This underappreciated GDP driver has strong tailwinds.

  • Savers Win Again: A normalized yield curve means savers can now earn returns above inflation—restoring balance to the risk/reward spectrum.

Negatives

  • Tariff Overhang: We’re in a slower patch largely due to trade uncertainty. Without it, the Fed may have already cut rates.

  • Valuations Elevated: Some pockets of the market are considered frothy.

  • Housing Needs Relief: Affordability remains the primary challenge for the housing market. To revert to historical norms, mortgage rates would need to decrease by nearly 3%, home prices would have to fall by over 25%, or incomes would need to increase by almost 40%—a process that could take about eight years at the current 4% wage growth rate. Even if mortgage rates drop to 5.5% by the end of 2026, home prices would still need to decline by nearly 8% to restore affordability. In summary, a significant improvement in the housing market appears unlikely soon nationwide, even as some markets remain resilient due to low supply.

  • Labor Shortages: A more strategic immigration policy is needed to meet workforce demands.

  • Deficit Warning: Persistent deficit spending risks burdening future generations. Fiscal discipline is increasingly urgent.

Conclusion:

The US remains the “best house on the block”—resilient, innovative, and fundamentally strong. But on the margin, some policies may be pushing allies toward alternative partnerships. The long-term outlook is positive, but not without risks.

Disclosures:

Tandem Wealth Advisors LLC (“Tandem”) is an SEC-registered investment adviser.

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