By Peter Tchir of Academy Securities

If you were dovish coming into this week, you are no longer alone. 

We’ve been arguing for 3 to 4 cuts this year. We thought the Fed should have cut at the last meeting and the Fed would have cut at the last meeting if the June jobs data remotely resembled what it got revised down to when the July jobs data was released (had to re-read that to make sure it makes sense, but I think it does – just all so confusing when the data gets revised so massively).

But we thought Powell might try to channel some hawkishness. That he might look for “bright” spots in the jobs data – it was an “anomaly,” the unemployment rate is low, or that the number of jobs to keep unemployment steady is well below 100,000 jobs per month. But we got none of that!

It is certainly possible that the August jobs data, released ahead of the next Fed meeting, will be strong enough to keep the Fed on hold. But we doubt it.

Also, the strategy of having so many potential Fed candidates all make reasonable arguments for a cut in September certainly helped.

It also seems likely, in hindsight (and not obvious from the recently released minutes) that while there were “only” 2 dissenters, the conversation to not cut may have been a lot closer than previously thought.

The market didn’t get all the way back to pricing in a September cut, but it likely will and we still think at least 3 (instead of 2.2 priced in) is the right number of cuts for the year – unless we get a strong turnaround in jobs, which is possible as various policies kick in – accelerated depreciation and ProSec (Production for Security).

Inflation and Tariffs

We will get the big monthly tariff revenue. If it is a big number it should help bonds (less of a monthly deficit) but we will see and hear more conversations about who will ultimately pay for the tariffs. We continue to expect this to take months and even quarters to play out, as the progression will be:

• Push suppliers for discounts (that will be product dependent and also depend heavily on how big or powerful the buyer is).
• Absorb some costs while figuring out the longer-term strategy (and even the longer-term policy as that remains in flux and is still winding its way through the courts).
• Slowly pass prices on to the consumers – while trying to not just keep consumers happy with prices, but also trying to avoid becoming a focus of the administration which continues to argue that foreigners pay for all the tariffs.

Tariff-related slowdowns in the economy are a bigger risk than tariff inflation, which is why we are still in the 3 to 4 cut camp.

A Couple of Equity Narratives

Despite the big rally on Friday, when the Nasdaq 100 was up 1.5%, it lost 1% on the week. There have been some small “cracks” in the AI/Data Center narrative of late. Anything from how data centers are being funded, to the availability of electricity (and water), to concerns about whether companies are actually deriving big benefits from the AI spend. Even lately, there are questions about which chips China will be allowed to buy along with which chips China will actually buy. Nothing major, but I think there is a “lurking” concern, at least for me, that the risk is we are spending as though we have 2030 technology (the cost has grown rapidly as this industry has dominated capital expenditures) with “only” 2025 technology. Yes, the technology is awesome, but is it delivering versus cost? Is “prediction” or “probability-based prediction” truly AI?

This industry has been such a strong driver not just of the stock market’s rebound off the lows, but also for the economy in general, that we should watch closely for any sign of a sniffle, let alone a cold.

Which we think means this is a good time to introduce this chart.

We used ETFs here rather than indices as it is an easy way to get everything “normalized” on U.S. hours and in USD.

The fact that FEZ, a Euro Stoxx 50 ETF, is ahead of QQQ (Nasdaq 100) for the year, probably doesn’t surprise many people as European growth (and spending) has been a big story. As has been the appreciation of the Euro (up 13% since the start of the year).

I cannot remember the last time I’ve seen anyone tout Chinese stocks. Emerging markets, heck yes. Emerging Markets ex-China, definitely. But Chinese stocks? Who in their right mind would buy stocks in the country that remains the “public enemy #1” of the trade team? Yet, FXI (China large cap ETF) just closed at its highest levels of the year, up 30% year-to-date and 55% for the past year.

Maybe Chinese stock performance is because of the trade deals? Or maybe, and I suspect this is the case, it is in spite of the trade deals. Their control over processed and refined rare earths, critical minerals, and commodities has become a clear issue for economies across the globe (the U.S. has taken some steps, like investing in MP, but so much more still needs to be done, which will fuel our ProSec™ trades).

The U.S. represents about 15% of Chinese exports, a big number, but only a portion of their economy, and while the U.S. is taking major steps to become less dependent on China (a move we agree with especially on issues surrounding National Security, broadly speaking), not every country has such strong views (or the ability to do anything about it, even if they have strong views).

The Russell 2000, which has lagged badly, finally had a good week, maybe even great week. It was up almost 4% on Friday, accounting for a big chunk of its year-to-date performance of 6%.

When we look at shares outstanding, IWM has seen outflows almost the entire year, though this started to reverse in August. QQQ, on the other hand, saw a lot of dip buying and has had pretty steady inflows, resulting in the largest number of shares outstanding on August 19th (more dip buying, but we saw outflows on Friday – which is interesting). Short interest in IWM is much greater than short interest in QQQ, which is interesting as a contrarian.

Is it time for a significant period of outperformance for the Russell 2000 versus Nasdaq 100? At the moment, I’m not convinced, but it is certainly worth a look.

The Gloves off With Russia?

President Trump this week basically accused the Biden administration of handcuffing Ukraine too much during the early years of the war.

It is safe to say that when Academy’s Generals and Admirals discuss prosecuting wars, they all mention the need to disrupt supply. When the U.S. is at war, it will try to take out supply lines immediately. That is hitting depots. Destroying transit (railways in particular as they are most efficient, but then bridges and “choke points” on roads). Not allowing an enemy to “easily” retreat and regroup is also standard operating procedure. Logistics are a huge component of warfare (I almost wrote modern warfare, but historically, logistics have always been key – hence why we have phrases like “an army marches on its stomach”).

With the administration comfortable selling weapons to Europe, which in turn can provide them to Ukraine (it solves the U.S. issue of “donating” versus being paid), we could see more weaponry available to Ukraine.

There are clearly risks of escalation by attacking into Russia more aggressively, but from the start, we’ve argued that Putin won’t negotiate towards a realistic deal unless he faces the “stick.”

On the energy and sanctions side of the equation we continue to watch:

• Russia’s trade with Europe. Europe has been weaning itself off of complete and utter dependence on Russia’s commodities, but there is still a meaningful reliance that we haven’t seen the will to break. That might be necessary to push Putin.
• India’s purchases of Russian oil have attracted the most attention. That is in no small part because of allegations that India then mixes Russian oil (bought very cheaply) with oil from other sources to then sell it for nice profits. This seems like an easier one for the Trump administration to go after.
• China. Will the U.S. risk escalating tensions with China over Russian oil? Do we risk losing supplies of processed rare earths and critical minerals? Is China well prepared with large stockpiles of oil anyways? This would be a big step as it would likely have negative consequences for the U.S. economy.
• Brazil is more interesting. The admin is unhappy with Brazil and, at the moment, they are threatened or under much higher tariff rates than most countries. Brazil and Russia remain large trading partners. Those two facts would indicate that we could go after more tariffs related to Russian trade with Brazil. The issue is that much of what Brazil imports from Russia would impact agriculture, globally. Diesel and “fertilizer” are big on the list of what Brazil imports and tariffing those items, while effective in forcing Russia to the table, has the risk of disrupting the agriculture industry as price increases in diesel and fertilizer would flow through the food chain, potentially rapidly.

Balancing the carrot and stick with both Russia and Ukraine will be tricky, but it seems that the world is now trying to navigate this, which is optimistic from the standpoint of getting a real accord in the region.

Crypto Corner

As discussed on Friday in Crypto Privateers, the Cybercrime Marque and Reprisal Authorization Act to Combat Foreign Scam Syndicates was introduced to Congress. We think this is an interesting development and will shed light on what we have argued is an idea that should be explored.

As mentioned in last weekend’s Crypto Corner, ETH continued to outperform Bitcoin.

Bottom Line

Look for the market to price in more rate cuts, sooner than it currently has without a significant steepening of the yield curve. It is still a bit early to put on flatteners, but that is the direction we are leaning towards in terms of curve shape. Doves are no longer lonesome after Powell’s message on Friday.

Corporate credit – steady as she goes and we could see more paper issued than expected after Friday’s “everything” rally created another great opportunity for issuers.

On equities, has a reversal in market leadership started? It is early, but it seems like we could be poised for small and medium sized companies to outperform the megacaps that have led the way forward since April.

Weirdly, if I had to pick a “rest of the world” trade, I’d focus on China rather than some of the other current outperformers, in no small part, because it still seems awkward to suggest owning Chinese stocks “even if just for a trade.”

It seems almost impossible to believe that this is the last official week of “work summer” in the U.S. 

Good luck, enjoy, and get ready for what is likely to be a hectic few months, despite what the MOVE and VIX indices are telling us (low vol, really?).

In another dangerous escalation, Russia has accused Ukraine of launching a drone strike on the Kursk Nuclear Power Plant, which sparked a fire and damaged an auxiliary transformer, resulting in a 50% reduction in the output of reactor number three.

Several other energy facilities were also reportedly targeted during the overnight strikes, involving likely hundreds of drones. Russia’s military said that it intercepted nearly one hundred of them across various locations in the south.

Kursk Nuclear Power Plant’s news service reported that the fire was quickly brought under control and with no injuries. Radiation levels remained normal, according to local reports.

However, the press service also noted that two other reactors are currently not generating power, though one of them is undergoing scheduled maintenance. Reuters additionally details, “Ukraine launched a drone attack on Russia on Sunday, forcing a sharp fall in the capacity of a reactor at one of Russia’s biggest nuclear power plants and sparking a huge blaze at the major Ust-Luga fuel export terminal, Russian officials said.”

Kursk region’s acting governor, Alexander Khinshtein, swiftly condemned the “threat to nuclear safety and a violation of all international conventions.” The site lies some 40 miles from the Ukrainian border.

The International Atomic Energy Agency (IAEA) weighed in on the Sunday attack, saying the agency is monitoring the situation and that radiation levels around the Kursk plant remain normal.

The IAEA statement, however, did not mention expressly that the damage was due to a Ukrainian drone attack. It only said it “is aware of media reports that a transformer at the Kursk NPP in Russia has caught fire due to military activity. While the IAEA has no independent confirmation of these reports, [Director General] Rafael Grossi stresses that ‘every nuclear facility must be protected at all times.'”

In a separate incident, a fire broke out at the port of Ust-Luga in Russia’s Leningrad region, where a major fuel export terminal is located – after some 10 Ukrainian drones that were shot down in the area, resulting in dangerous falling debris.

Fire breaks out at Kursk nuclear power plant, no threat to people or facility, Russia’s REN TV reports pic.twitter.com/xGQeeNRByV

— TRT World Now (@TRTWorldNow) August 23, 2025

The war on energy sites continues on, and is growing. Ukraine, in mounting such a brazen attack, is clearly trying to up its leverage – though as President Trump has previously stated, it’s Russia that still holds all the cards.

All of this illustrates that Trump has been wise to block Ukraine’s military from using American missiles for long-range attacks on Russian territory.

Fresh reporting in The Wall Street Journal has said that Washington is not allowing Ukraine to use US ATACMS missiles for such attacks, and that this prohibition has been on for at least several months.

Ukrainian drones attacked the Kursk Nuclear Power Plant, the Novatek terminal in Ust-Luga port, and the Syzran oil refinery. At Kursk, a drone’s debris damaged a transformer, reducing Unit 3’s capacity by 50%, with one unit operational. In Ust-Luga, drone debris caused a fire at… pic.twitter.com/Pf1FZIrRbk

— Aleksandar Djokic (Александар Джокич) (@polidemitolog) August 24, 2025

 “President Trump has been very clear that the war in Ukraine needs to end. White House Spokesperson Karoline Leavitt told the newspaper. “Secretary Hegseth is working in lockstep with President Trump,” she noted. According to the report: 

The Pentagon has for months been blocking Ukraine’s use of long-range missiles to strike inside Russia, U.S. officials said, limiting Kyiv from employing a powerful weapon in its fight against Moscow’s invasion.

A high-level Defense Department approval procedure, which hasn’t been announced, has prevented Ukraine from firing any U.S.-made long-range Army Tactical Missile Systems, or Atacms, against targets in Russia since late spring, the officials said. On at least one occasion, Ukraine sought to use Atacms against a target on Russian territory but was rejected, two officials said.

“Elbridge Colby, the Pentagon’s undersecretary for policy, developed the ‘review mechanism’ to decide” on Ukraine’s repeat requests for permission to use long-range weapons made by the US and the ones provided by Western allies and depending on American intelligence and components, WSJ noted.

So the Trump administration exercises effective veto over this – but it’s still a very dangerous situation, and it doesn’t mean the scenario hasn’t been ruled out.

Trump hopes that in blocking this option, Putin can still be wooed to the peace table to find settlement – but the reality remains that Washington should have never handed these weapons to Kiev in the first place, approved under the Biden administration – though the program and transfers have continued under Trump. The president plans to make a major decision in two weeks time – though we doubt peace talks will have progressed much by that point.

Authored by Jake Scott via the Foundation for Economic Education (FEE),

President Donald Trump’s executive order of July 31st, effective Aug. 7th, has upended global trade dynamics in a single stroke. Slapping a 40 percent tariff on all “transshipped goods”—products rerouted through third countries to dodge U.S. duties—this is merely the natural development of his evolving protectionist agenda.

Just a week after the order, the move is a clear shot at China’s sprawling manufacturing empire, which has long exploited methods like transshipment and “nearshoring” to skirt American tariffs in general, and Trump’s tariff policies in particular.

While applied globally, China stands to take the biggest hit (and likely already is), with its vast factory networks and knack for rerouting goods through Southeast Asia, Mexico, and beyond. This isn’t just a tariff hike; it’s a calculated escalation in Trump’s ongoing crusade to reshape U.S. trade policy and the global economy in the United States’ favor. But ripple effects that bruise consumers are already visible—and this move is likely to strain relationships with key allies as well.

The new tariffs build on Trump’s first-term strategy—so extensive that it now has a Wikipedia entry—when he wielded America’s economic heft like a sledgehammer to renegotiate or smash trade deals he deemed unfair. Back then, Chinese firms sidestepped U.S. tariffs by setting up shop in countries like Vietnam and Mexico, funneling goods through these hubs to mask their origins.

This nearshoring strategy buoyed many economies that had pre-existing arrangements with the United States or were treated more favorably than China, such as Canada and Latin American nations. It is also seen as a natural part of globalization: shipping parts from where they are constructed (like China), assembling them in developing nations (like Mexico), and then exporting to high-value markets (like the United States). Nearshoring has a long history, but the fragility of extended global supply chains was exposed in the Covid pandemic; since then, manufacturers have sought to mitigate their damage.

The U.S. trade deficit with China (roughly $295 billion) has long been a sore point for Trump, who sees transshipment and nearshoring as sneaky workarounds. The 40 percent duty on these goods, layered atop existing tariffs, aims to plug this loophole. As Stephen Olson, a former U.S. trade negotiator, noted in the New York Times, China will likely view this as a direct attempt to “box them in,” potentially souring already tense talks.

As FEE’s readers will know, this isn’t Trump’s first use of tariffs as a stick to beat the horse. Earlier this year, he raised duties on EU goods to 15 percent from the 1.2 percent that preceded his second term, a move that sparked both relief—for averting a threatened 30 percent rate—and criticisms over the increased cost of European imports. This is especially likely to hit Trump’s own voter base, given the prevalence of pharmaceuticals and car imports from the EU.

Now, with this global imposition of transshipment and nearshoring, Trump is doubling down on his economic geopolitical strategy, targeting not just China but any country facilitating indirect shipments. Data from Asia Financial underscores the urgency: China’s exports to the United States plummeted 22 percent in July 2025 compared to last year, but those goods didn’t vanish—they were redirected to ASEAN nations, surging by 17 percent, signaling a pivot to transshipment hubs. Countries like Vietnam have tightened inspections to curb this practice, but the scale of China’s manufacturing makes enforcement a Herculean task.

Broader implications include a risky pivot towards China. Tariffs could accelerate integration via the Belt and Road Initiative, and Regional Comprehensive Economic Partnership, deepening ASEAN-China ties as U.S. access wanes. Beijing’s threatened countermeasures against U.S. deal-makers, in turn, force ASEAN nations to tread carefully and potentially choose between their top export market (America) and largest trading partner (China).

Trump’s order also tweaks other tariffs, ranging from 10 percent to 41 percent, with a hefty 100 percent levy on microchips and pharmaceuticals and a 25 percent tax on goods from nations buying Russian oil—a move that is already disrupting relations with India and pushing the BRICS countries even closer together.

These moves align with Trump’s broader economic geopolitical strategies: shrinking the U.S. trade deficit and bolstering domestic industries. But the cost is steep for American consumers. Higher tariffs may generate revenue for the Treasury in the short term, but they also mean pricier goods in the long term. China’s cost advantage keeps its exports competitive despite duties. Ironically, it’s China’s massive level of onshored manufacturing that Trump is attempting to rebalance. As Richard Baldwin wrote, “[China’s] production exceeds that of the nine next largest manufacturers combined.”

Of course, China may be the primary target of this bludgeoning, but it is not the only nation affected: Vietnam, with a $120 billion U.S. trade surplus, negotiated a cut from 46 percent to 20 percent, a move that attempted to offset its place as a transshipping hub for Chinese exports. Cambodia’s garment sector, employing a million workers, celebrated the tariff slash from 49 percent to 19 percent, but its reliance on Chinese inputs keeps transshipment risks high.

Still, ASEAN markets are complex and multifaceted. Some celebrated the tariffs as “leveling” the trading field. Werachai Lertluckpreecha, a representative of the Thailand-based Stars Microelectronics, praised Trump’s tactics for putting Thailand “on par with Indonesia and the Philippines and lower than Vietnam … we’re happy.”

This tariff gambit echoes broader themes of sovereignty and control—and Trump is usually the last one to blink. His tariffs assert U.S. dominance, forcing trading partners to bend or break, yet the risk of overreach looms. Broader impacts include U.S. consumer price hikes (e.g., shoes up 40 percent, cars projected to cost $5,800 more on average, according to the Tax Foundation), potentially fueling inflation and debt reliance. Markets shrugged somewhat, with minor S&P 500 dips, but volatility looms.

Israel’s military conducted airstrikes on Yemen’s Houthi-controlled capital, Sanaa, on Sunday, targeting high-profile sites in a significant escalation of hostilities.

A very photogenic explosion in Yemen. What can I say? Business is booming! pic.twitter.com/gKEVVkCVkg

— Uri Kurlianchik (@VerminusM) August 24, 2025

Israeli Air Force is BOMBING the Houthi terrorists in Yemen. FAFO. pic.twitter.com/8qofpGtV5T

— Hananya Naftali (@HananyaNaftali) August 24, 2025

The strikes hit areas near the presidential palace, the Asar and Hizaz power plants, and Houthi facilities suspected of housing artillery, including ballistic missiles, according to regional reports.

JUST IN: 🇮🇱🇾🇪 Israel launches strikes on Yemen’s capital, Sanaa. pic.twitter.com/qKMSYMelu3

— BRICS News (@BRICSinfo) August 24, 2025

The operation was a direct response to recent Houthi attacks on Israel, including projectile launches on Friday, a military source told the Jerusalem Post. While Israel has previously targeted Houthi infrastructure, its strikes have largely focused on the strategic port city of Hodeida, a critical economic and military hub. The shift to Sanaa signals a broader and more aggressive approach to the conflict.

At least two people were killed and five others injured, Al Masirah, a Houthi-affiliated media outlet reported, according to Al Jazeera.

“The attacks were carried out in response to repeated attacks by the Houthi terrorist regime against the state of Israel and its citizens, including the launch of surface-to-surface missiles and unmanned aerial vehicles towards the country’s territory,” the Israeli military said in a statement.

The Houthis, meanwhile, have vowed to continue their campaign in solidarity with Palestinians. “The Israeli aggression against Yemen will not discourage us from continuing our support for Gaza, no matter the sacrifices,” Houthi official Mohammed al-Bukhaiti said in a statement obtained by Al Jazeera.

In March, President Donald Trump launched Operation Rough Rider, a major air and naval campaign targeting Houthi-controlled areas in Yemen to curb their attacks on Red Sea shipping. The strikes, which began on March 15, hit key locations including Sanaa, where at least four airstrikes struck the Eastern Geraf neighborhood of Shouab district and three in the Al-Sawad area; Hodeida, with significant strikes on the Ras Isa oil port. U.S. Central Command reported that the strikes killed hundreds of Houthi fighters, including senior missile and UAV officials, with unofficial estimates ranging from 500 to 600 Houthi terrorists killed. A ceasefire between the U.S. and the Houthis was announced on May 6.

Authored by Lance Roberts via RealInvestmentAdvice.com,

One of the hallmarks of very late-stage bull market cycles is the inevitable bashing of long-term market valuation metrics. In the late 90s, if you were buying shares of Berkshire Hathaway, it was mocked as “driving Dad’s old Pontiac.” In 2007, valuation metrics were dismissed because the markets were flush with liquidity, low interest rates, and “Subprime was contained.”

“Valuation is the capstone of proximate causes for a market top, and the one most indicative of the potential magnitude of any subsequent selloff. It’s well known that valuations are high for the US market, but I thought I’d update my aggregate indicator, which combines the main measures of long-term stock-market worth. It previously peaked in April, but has just made a new all-time high this month. Not a welcome sign if you’re a long-term bull.” – Simon White, Bloomberg

Of course, just as we have seen so many times, we again see repeated arguments about why “this time is different.” For some, it is the belief that the Fed will bail out markets if something goes wrong. For others, “Artificial Intelligence” and “Cryptocurrencies” are a new paradigm of investment returns. Of course, it is hard to blame investors for feeling this way, given the market’s outsized gains over the last 15 years.

Regardless of the reasoning, there is little argument that current trailing market valuations are elevated.

However, we need to understand two crucial points about valuations.

1. Market valuations are not a catalyst for mean reversions, and;
2. They are a terrible market timing tool.

Furthermore, investors often overlook the most essential aspects of valuations.

1. Valuations are excellent predictors of return on 10 and 20-year periods, and;
2. They are the fuel for mean-reverting events.

Critics argue that valuations have been high for quite some time, and a market reversion hasn’t occurred. However, to our point above, valuation models are not “market timing indicators.”  The vast majority of analysts assume that if a measure of valuation (P/E, P/S, P/B, etc.) reaches some specific level, it means that:

1. The market is about to crash, and;
2. Investors should be in 100% cash.

This is incorrect.

Market valuation measures are just that—a measure of current valuation. Moreover, market valuations are a much better measure of “investor psychology” and a manifestation of the “greater fool theory.” This is why a high correlation exists between one-year trailing valuations and consumer confidence in higher stock prices.

What market valuations express should be obvious. If you “overpay” for something today, the future net return will be lower than if you had paid a discount for it.

Current market valuations are not sustainable. Fundamentals, revenue growth, earnings power, free cash flow, margins, and debt govern valuation over time. This is particularly true when the vast majority of the market generates little to no earnings growth, but growth is only a function of a handful of companies.

Markets eventually will revert toward fundamentals. That process takes time, but it is both inevitable and relentless

Price‑to‑Sales and Market‑Cap‑to‑GDP Send a Warning

The Price‑to‑Sales (P/S) ratio measures how much investors pay for each dollar of a company’s sales. The S&P 500 currently trades around 3.2 times trailing sales. The long‑term average is closer to 1.6 times. For perspective, a P/S ratio above “2″ signals elevated valuations. The market P/S ratio is currently more than 2-standard deviation above its historic average.

The elevated P/S reflects bullish expectations that when you pay over $3 per $1 of sales, you expect future growth to justify it. That means investors expect strong revenue gains ahead. But if growth slows, valuations must adjust downward. In other words, the market is currently “priced for perfection,“ which leaves a lot of room for disappointment.

Another measure is Market‑Cap‑to‑GDP, known as the Buffett indicator. This measure compares total stock market value to national output. Given that earnings and revenue growth come from economic activity, the market valuation should represent the strength of the overall economy. Currently, that measure of market valuation resides at 217%. Notably, the long‑term average is around 155%. At current levels, valuations are well above what the economy can generate, and two standard deviations above the long-term trend.

That signals broad market overvaluation versus economic size. It suggests prices may be disconnected from the real economy that generates earnings.

Both metrics send a clear message: valuations exceed long‑term norms. That means excess return potential is limited. Downside risk rises if sentiment shifts or fundamentals falter.

These high valuations can be sustained longer than expected if sentiment remains jubilant. But you cannot ignore the math. Expectations already baked into the price are high. Therefore, you must realize that you tolerate a limited margin of safety unless fundamentals outperform.

Valuation Exuberance Increases The Overall Risk Profile

Still, the current level of exuberance is unsurprising given the strongly trending bull market, particularly when Wall Street needs to justify higher valuations. The problem is that such exuberant forecasts rarely come to fruition. For example, in March 2023, S&P Global predicted that 2024 earnings would grow by 13% for the year. In reality, earnings grew by just 9% despite the market rising nearly 28%. In other words, given that actual earnings fell well short of previous estimates, the 2024 market was primarily driven by valuation expansion.

Current earnings projections for 2025 suggest a nearly 20% increase, well above historical growth trends. While such detachments of the market from earnings are not uncommon, they tend not to be sustainable over more extended periods. We suspect that the risk to stocks in 2025 will be a failure of earnings to meet optimistic expectations.

When sentiment and expectations exceed economic realities, there is the potential for stock repricing. As noted, “stocks are priced for perfection,” which means any shortfall could lead to a more substantial decline in price. For instance, the S&P 500’s P/E ratio has reached levels that some analysts consider concerning, reflecting investor optimism that may not align with underlying economic fundamentals.

Given the interdependence between earnings and economic growth, valuations present a more serious challenge. A better way to visualize this data is to look at the correlation between the annual change in earnings growth and inflation-adjusted GDP. There are periods when earnings deviate from underlying economic activity. However, those periods are due to pre- or post-recession earnings fluctuations. Currently, economic and earnings growth are very close to the long-term correlation.

It is worth repeating that valuations are unreliable market-timing tools. Elevated valuations reflect heightened investor optimism and expectations of robust earnings growth in bull markets and can remain that way for extended periods.

However, excess market valuations leave investors vulnerable to unexpected, exogenous events. Those “events,” when they occur, lead to sharp sentiment reversals. What would cause such a sentiment reversal? No one knows. This is why when the “unexpected” happens, Wall Street’s immediate response is to suggest that “no one could have seen that coming.”

As such, investors must continue managing risk into 2025 and navigate the markets accordingly.

President Trump’s Sunday morning attention centered on Maryland Governor Wes Moore, who on Saturday unleashed incendiary comments aimed at the White House. The far-left governor, just north of D.C., has watched his polling collapse as his party of leftist radicals drags Maryland into a power-bill crisis, fiscal turmoil, years of violent crime and chaos, and an ongoing sanctuary state mess. Cornered by failure, Moore’s comments have now put Maryland squarely in the spotlight. 

“For anybody, especially in Washington D.C., who might not hear me: If you are not willing to be part of the solution, keep our names out of your mouth.Donald Trump, if you’re not willing to walk our community, keep our name out of your mouth,” Moore said at an event on Saturday. 

If President Trump were to walk our streets, stand with our people, and visit our community, he would see what I see: 𝐎𝐧𝐞 𝐨𝐟 𝐭𝐡𝐞 𝐠𝐫𝐞𝐚𝐭𝐞𝐬𝐭 𝐜𝐢𝐭𝐢𝐞𝐬 𝐢𝐧 𝐭𝐡𝐞 𝐔𝐧𝐢𝐭𝐞𝐝 𝐒𝐭𝐚𝐭𝐞𝐬 𝐨𝐟 𝐀𝐦𝐞𝐫𝐢𝐜𝐚. pic.twitter.com/yipidTBTLK

— Governor Wes Moore (@GovWesMoore) August 21, 2025

On Sunday morning, Trump fired back on Truth Social at Moore: 

Governor Wes Moore of Maryland has asked, in a rather nasty and provocative tone, that I “walk the streets of Maryland” with him. I assume he is talking about out of control, crime ridden, Baltimore?

As President, I would much prefer that he clean up this Crime disaster before I go there for a “walk.” Wes Moore’s record on crime is a very bad one, unless he fudges his figures on crime like many of the other “Blue States” are doing. But if Wes Moore needs help, like Gavin Newscum did in L.A., I will send in the “troops,” which is being done in nearby D.C., and quickly clean up the crime.

After only one week, there is NO CRIME AND NO MURDER IN DC! When it is like that in Baltimore, I will proudly “walk the streets” with the failing, because of Crime, Governor of Maryland.

P.S. Baltimore is ranked the 4th WORST CITY IN THE NATION IN CRIME & MURDER. Stop talking and get to work, Wes. I’ll then see you on the streets!!! Also, I gave Wes Moore a lot of money to fix his demolished bridge. I will now have to rethink that decision??? Thank you for your attention to this matter. MAKE AMERICA GREAT AGAIN! President DJT

Trump followed the post by citing the NYT’s report about claims of Moore’s stolen valor…

Moore’s move to poke the bear – that being Trump – comes as the governor has just experienced a collapse in local polling data…

…as the crises in the state pile up due to failed Democratic Party leadership: 

• Power Bill Crisis Sends Maryland Gov. Wes Moore’s Approval Plummeting

• Far-Left Panic: Dark Money NGO Floods Baltimore Airwaves With Propaganda To Save Governor

• Democrats Spark “Manufactured Power Crisis” In Maryland As Left Begins To Panic

• “Paying The Price For Failed Leadership”: Maryland Hit With Moody’s First Credit Downgrade In 50 Years

• After Credit Downgrade, Maryland’s Leftist Governor Torpedoes Reparations Bill To Avoid Political Blowback

• Maryland Democrats Pass “Sleep Tax” – Is A Thinking Tax Next?

• Maryland Democrats “Clearly In Denial” As State Faces Twin Crises

• Maryland’s Death Spiral: Reckless Democratic Lawmakers Spark Budget Crisis Fears As “Deep Recession” Looms

Everything you need to know about Moore smiling in this picture with Alex Soros. 

Who does Moore serve? Marylanders or Soros?

Authored by Daniel Lacalle via Mises.org,

Easing and tightening decisions move all assets from bonds to private equity. Their role is supposed to be to control inflation, provide price stability, and ensure normal market functions. However, there is little evidence of any success in achieving their goals. The era of central bank dominance has been characterised by boom-and-bust cycles, financial crises, policy incentives to increase government spending and debt, and persistent inflation. Recently developed economies’ central banks have taken an increasingly interventionist role.

The creation and proliferation of central banks over the past century promised greater financial stability. Nevertheless, as history and current events continually show, central banks have not prevented financial crises. The frequency and severity of these crises have fluctuated but have not declined since central banks became the leading figure in financial market regulation and monetary interventions. Instead, central banking has introduced new fragilities and changed the nature, but not the recurrence, of financial turmoil.

Empirical evidence dispels the myth that central banks ended the era of frequent financial crises. Regardless of central bank oversight, a credit boom preceded one in three banking crises. Who created those credit booms? Central banks, through the manipulation of interest rates. According to Laeven and Valencia’s comprehensive database, there were 147 banking crises between 1970 and 2011 alone, in an era of near-universal central bank dominance. Financial crises remain a persistent global phenomenon, occurring in cycles that coincide with episodes of credit expansion. Central banks have often prolonged boom periods with low rates and elevated asset purchases and created abrupt bust moments after making mistakes about inflation and credit risks.

According to Reinhart and Rogoff’s work, the rate of crises has not dramatically changed with central banking. Instead, the forms of crises evolved. Twin crises (banking and currency) remain common, and the severity, measured in output loss or fiscal costs, has often increased, especially as financial institutions and governments grew intertwined with monetary authorities.

The Great Financial Crisis of 2008, the Eurozone sovereign debt crisis, and the 2021–2022 inflationary burst rank among the events with the highest costs in history, contradicting the view that central banks have neutralised the risk or costliness of crises.

Central banks act as “lenders of last resort” and regulators. However, with each subsequent crisis, the solution is always the same: larger and more aggressive asset purchase programmes and negative real rates. This means that central banks have gradually moved from lenders of last resort to lenders of first resort, a role that has amplified vulnerabilities. Due to the globalisation of modern central banking and financial innovations, crises tend to be larger in scale and more complex, impacting most nations. The profound involvement of central banks in markets means their policies, such as emergency liquidity or asset purchases, mask systemic risks, leading to delayed but more dramatic failures.

In many advanced economies, recent waves of crises were triggered by debt accumulation and market distortions engineered by central banks, often under the guise of maintaining stability. The IMF and World Bank both note that about half of debt accumulation episodes in emerging markets since 1970 involved financial crises, and episodes associated with crises are marked by higher debt growth, weaker economic outcomes, and depleted reserves—regardless of central banking.

Major crises in recent decades have highlighted that central banks do not prevent systemic disruption. Often, their interventions have only delayed the reckoning but made underlying imbalances, particularly government debt, worse. Central banks do not prevent financial crises. They reshape them, often making their consequences more far-reaching, while shifting the costs onto the public through inflation and debt monetisation.

The Growing Priority: Supporting Government Over Managing Inflation

As I argued recently, central banks are increasingly prioritising government debt distribution over combating inflation. Central banks have one priority: keeping the government debt bubble alive. Central banks constantly inject liquidity to stabilise sovereign issuers rather than uphold price stability. In 2025 alone, global debt maturities will reach nearly $2.78 trillion, and central banks are expected to continue easing monetary policies, even as inflation proves persistent.

Central banks use their enormous power to disguise the insolvency of sovereign issuers and make their debt pricier, which leads to the subsequent excessive risk-taking and asset price inflation. Furthermore, the idea that low rates and asset purchases are tools that help governments reduce their fiscal imbalances and conduct budget prudence is negated by reality. Artificially low rates and asset purchases justify persistent deficits and high debt.

Central banks are enabling inflation and financial instability when they should be restraining it. By ignoring monetary aggregates and the risks created by rising government intervention in the economy and currency issuance through debt instruments, central banks are enabling the slow-motion nationalisation of the economy.

The misguided central bank monetary expansion and negative rate policy of 2020, perpetuated well into 2022 despite soaring inflation, is a clear example. Governments benefited in the period of expansion with enormous debt purchases that enabled an ill-advised increase in government spending and debt. Meanwhile, citizens and small businesses suffered from high inflation. Thus, when central banks finally acknowledged the inflation problem they helped create, they kept loose policies prioritising liquidity, which fuelled more government irresponsibility, and the rate hike damaged the finances of families and small businesses that previously suffered the inflation burst. Governments weren’t concerned about rate hikes because they increased taxes.

The Federal Reserve’s response to increasing government deficits has consistently favoured greater government intervention and rising debt levels, even at the expense of higher inflation, which has undermined its independence and credibility.

Independence vanished when central banks abandoned or ignored price stability, blaming inflation on various absurdities instead of government spending and money supply growth.

The Bank of England, for example, keeps cutting rates and easing policy with rising inflation.

Central banks tend to ease monetary policy when governments increase spending and taxes. However, policymakers claim to be data-dependent and strict when governments reduce taxes and spending. Why? Central banks have transitioned from being independent monetary authorities safeguarding the currency’s purchasing power and controlling inflation to facilitating the distribution of rising government debt and disguising rising issuer insolvency.

Modern central banking has shown that no single authority should set interest rates and liquidity. They have consistently erred on the side of rising government size in the economy and made erroneous estimates of inflation and job growth. The reason for this is straightforward: as the size of government in the economy and sovereign debt, which is often considered the safest asset, increase, the central bank’s role becomes increasingly important for maintaining market stability.

Many central banks state that they don’t interfere with fiscal policy and remain independent… except when someone dares to cut taxes and political spending. As such, central banks are not a limit to risk-taking, rising government spending and budget irresponsibility, but rather a tool that enables market and government excess.

The Trump administration has notified lawyers of alleged MS-13 illegal alien gangster Kilmar Abrego Garcia (whom the globalist MSM portrays as a “Maryland father“) that the Salvadoran national, facing human smuggling charges in Tennessee and having refused an offer by the federal government to plead guilty and serve his sentence in Costa Rica, may be deported to Uganda next week. 

According to the seven-page filing in the Federal District Court in Nashville, the Salvadoran national has been instructed by the federal government to report to ICE’s Baltimore, Maryland, office on Monday morning.

“Despite having requested and received assurances from the government of Costa Rica that Mr. Abrego would be accepted there, within minutes of his release from pretrial custody, an ICE representative informed Mr. Abrego’s counsel that the government intended to deport Mr. Abrego to Uganda and ordered him to report to ICE’s Baltimore Field Office Monday morning,” the filing said. 

The notice was issued minutes after the Salvadoran national’s release on Friday, prompting his attorneys to accuse the Trump administration of trying to coerce a plea deal by threatening removal to a country with documented human rights abuses where he does not speak the language. 

DHS Secretary Kristi Noem blasted the release of the alleged MS-13 illegal alien gangster by “activist liberal judges”…

“Activist liberal judges have attempted to obstruct our law enforcement every step of the way in removing the worst of the worst criminal illegal aliens from our country. Today, we reached a new low with this publicity hungry Maryland judge mandating this illegal alien who is a MS-13 gang member, human trafficker, serial domestic abuser, and child predator be allowed free,” Noem wrote on X. 

She added, “By ordering this monster loose on America’s streets, this judge has shown a complete disregard for the safety of the American people. We will not stop fighting till this Salvadoran man faces justice and is OUT of our country.” 

Activist liberal judges have attempted to obstruct our law enforcement every step of the way in removing the worst of the worst criminal illegal aliens from our country. Today, we reached a new low with this publicity hungry Maryland judge mandating this illegal alien who is a…

— Secretary Kristi Noem (@Sec_Noem) August 22, 2025

The Salvadoran national’s smuggling allegations date back to a 2022 traffic stop on a Tennessee highway, where he was driving eight passengers and no luggage. Although police suspected human smuggling, no charges were filed at the time. He has also been accused of physically abusing his wife, Jennifer Vasquez Sura, a U.S. citizen, as well as having alleged ties to cartel gangsters. 

BREAKING: Fox News has obtained video footage of Kilmar Abrego Garcia allegedly involved in human smuggling, as noted by Tennessee State Troopers.

This is the man Democrats decided to put their entire party behind lmao.

The incident happened during a traffic stop in Tennessee… pic.twitter.com/WrqkM36BkV

— Collin Rugg (@CollinRugg) May 2, 2025

Related:

• “Maryland Father” Or MS-13 Migrant Gangster. Which Is It, MSM?

• NPR: Abrego Garcia Was “Living Quietly” In Maryland Before He Was Deported

Under a ruling last month by U.S. District Judge Paula Xinis, who had ordered the administration to facilitate the Salvadoran national’s return from a mega-prison in El Salvador, officials must give him and his attorneys at least 72 business notice before carrying out any deportation to a third country.

The Democratic Party has devoted itself to defending criminal illegal aliens, protecting violent criminals instead of victims, vocally embracing socialism and Marxism, waging a Marxist-style color revolution against opponents, and unleashing social justice warriors who pushed failed progressive policies at the local and state levels. The very same policies have transformed once-peaceful areas within some cities into crime-ridden hellholes. 

Why is that? Their globalist agenda is clear and alarming, and these policies certainly seem aimed at accelerating the death of a nation.

Authored by Tho Bishop via Mises.org,

In the age of Trump, even the most boring of political positions can find themselves in the center of the political news cycle. In recent weeks, it has been the Bureau of Labor Statistics. After severe revisions to previous job reports, Trump fired BLS Commissioner Erika McEntarfer and has nominated E.J. Antoni, who—if nothing else—has claimed to be a fan of Murray Rothbard.

Usually a changing of the guard at a position such as this would go on with little fanfare. In fact, one of the reasons why BLS Commissioners typically overlap from presidential administration to presidential administration is that it has traditionally been seen as a low-priority position for a president’s agenda.

So why has this become an issue now?

The obvious answer is that President Trump is a man who cares about headlines and his social media venting about the disastrous job numbers understandably raises the spectre of concern about the “politicalization” of the statistics bureau. The fact that bad jobs data would traditionally be viewed as an asset in his feud with crusade for rate cuts from the Federal Reserve is secondary to his desire to project his vision of a “Golden Age.”

The backlash to Trump’s focus on BLS is predictable, but also revealing. After all, what is not in question is the bad track record of monthly BLS data in recent years. The news that sparked Trump’s fury wasn’t just the economy underperforming in the area of job creation, but significant revisions downwards from previous reports. This was also true under the prior administration.

While revisions to BLS data isn’t new, the unreliability of their monthly reports have increased in recent years. One clear issue is that survey participation rates used to form their original report have fallen as low as under 43 percent, resulting in estimates increasingly reliant upon projections and modeling. These rates improve in later reports, resulting in the significant revisions.

Antoni has pointed to these underlying issues as a potential reason to suspend the monthly jobs report in favor of just releasing the more accurate quarterly report, which was met by horrifying gasps from critics. While it’s easy to identify a political motivation in preventing unflattering economic data from being released to the public, it is worth noting that it is the inaccurate monthly reports that have projected a rosier depiction of the economy.

The real question is why is a monthly jobs report viewed as so significant, given that there is universal recognition of systemic issues with their methodology and their recent record of poor past performance? The issue is that government statistics are themselves essential to the operations of how Washington operates.

As Murray Rothbard noted in his article, Statistics: Achilles’ Heel of Government:

Only by statistics, can the federal government make even a fitful attempt to plan, regulate, control, or reform various industries — or impose central planning and socialization on the entire economic system…

Statistics, to repeat, are the eyes and ears of the interventionists: of the intellectual reformer, the politician, and the government bureaucrat. Cut off those eyes and ears, destroy those crucial guidelines to knowledge, and the whole threat of government intervention is almost completely eliminated.

The perceived importance of government statistics is precisely because they are the tools used to justify and execute the labyrinth of interventions in society. Real-world conditions—be they in markets or the safety of neighbors—are secondary to the ability of politicians to point to the officially-credentialed statistical measures to tout the wisdom of their desired policy aims. In recent years, we’ve seen politicians tout the safety of cities that stopped reporting meaningful violent crime statistics.

As such, questioning the credibility of the government statistics is a means by which to erode credibility in the state itself. Perceiving the collection of government statistics as being partisan, erodes the credibility of the state itself. It is better, then, to maintain the tradition and the perception of norms in the accounting and releasing of government statistics than it is to meaningfully consider the underlying value of what is being recorded in the first place.

This does not mean, of course, that Washington is reflexively against profound changes into how government statistics are compiled. The Consumer Price Index (CPI) has undergone a number of changes over the last several decades, resulting in markets for alternative measures of inflation. Sometimes the Federal Reserve will simply decommission certain data sets. These changes, however, are granted the credentialed veneer of acceptability by the expert class, and often done in an understated way far from public attention.

In short, despite the transparent political aims of the current administration in the battle over the future of the BLS data sets, the emphasis placed on government statistics is inherently intractable to the operations of the interventionist state and, therefore, they should always be viewed through a lens of cynicism. Much like romantic notions of “Federal Reserve independence,” “a federal system of checks and balances,” or the “independent nature of professional bureaucracy,” to suggest otherwise is to ignore the realities of how Washington operates in practice.

Buying a home for the first time is a milestone many associate with adulthood. But for today’s first-time home buyers, that goal keeps slipping further into the future.

This Markets in a Minute graphic, created by Visual Capitalist’s Jenna Ross, in partnership with Terzo, shows how the age at which people in the U.S. buy their first home has been climbing over time.

Later to the Property Ladder

Using data from the National Association of Realtors (NAR), we explore how the median age of first-time home buyers has changed from 2010 to 2024. 

In 2010, the median age was 30, little changed from NAR’s first records of age 29 in 1981. However, the last 15 years have seen quite a shift.

Source: National Association of Realtors

By 2024, people buying homes are much older, hitting a record of 38. The share of first-time home buyers on the market also dropped from 32% to 24%.

Challenges for First-Time Home Buyers

Many are arriving late to the property ladder—and for good reason. The first few rungs have become harder to reach, or in some cases, feel entirely broken. 

High home prices and elevated mortgage rates have made homes much less affordable, especially with limited housing inventory. Incomes also haven’t been keeping up with rising home costs, with the price-to-income ratio climbing from 3.5 in 1985 to 5.0 in 2025. 

On top of this, many say high rent, student loans, credit card debt, and car loans are hurdles to saving for a down payment.

A New Financial Profile for Beginner Homeowners

Today’s first-time home buyers are climbing a ladder with steeper steps and fewer footholds. As a result, they tend to be older and wealthier before taking the first step.

The typical first-time buyer now earns around $97,000 annually, a jump of $26,000 since 2022. In some states, the income needed to buy a home is much higher—as high as $229,000 in Hawaii.

When it comes to a down payment, people buying homes for the first time put down 9% on average. While the bulk use savings for down payments, a quarter of newbie buyers used loans or gifts from friends and family.