Independent Financial Research & Analysis
Daily briefings, 7,600+ real-time charts, and macro insights from Dr. Ed Yardeni and his research team.
Research
Latest Research
Recent insights from our research team
ECONOMIC WEEK AHEAD: August 31 - September 4
Fed Chair Kevin Warsh's speech at Jackson Hole on Friday was hawkish. He declined to offer forward guidance, saying he's "committed to a discipline, not a decision." He said this summer's better-than-expected inflation prints don't yet show that underlying trends have meaningfully improved, and that he'd be "hard pressed to describe broad financial conditions as 'restrictive.'" Federal funds rate futures now imply 2.4 rate increases over the next 12 months, up from 1.8 a week earlier, with odds of a September hike rising to about 60% from 35% (chart). Fedspeak continues this week, with Governor Barr (Tue) and Governor Waller (Thu) likely to weigh in on the issues discussed by Warsh. This week's economic calendar is jam-packed with labor market data, capped off by August's employment report (Fri), along with ISM's manufacturing and services PMIs, revised Q2 productivity, and the Fed's Beige Book. The Bank of Canada meets Wednesday and is expected to hold. Palo Alto Networks, Broadcom, MongoDB, Credo, and Snowflake report earnings this week, following the strong reception given to Nvidia, Salesforce, and CrowdStrike last week. Here's more: (1) Employment. July's nonfarm payrolls fell 23,000, dragging the three-month average down to 20,000 (chart). We expect a figure above 50,000 for August, which would be a solid outcome and a clear sign of firming after July's weak print. Last month's odd declines in leisure & hospitality and local education likely were reversed this month. Challenger's July layoff announcements totaled 33,400, still low by historical standards (chart). Layoffs probably remained light last month, according to initial unemployment claims, which held at a four-week average of 204,500. Fed Chair Kevin Warsh noted at Jackson Hole that claims are near their lowest level in decades, calling them "an empirically robust real-time indicator." July's ADP private payrolls rose 44,000, down sharply from June's 98,000. August's ADP report (Wed) may show some stabilization, with ADP's weekly readings picking up for the past two weeks to a four-week average of 11,750 by August 8, up from a mid-July bottom of 8,250 (chart). June JOLTS data showed job openings at 7.4 million, with the "jobs plentiful" share of consumers at 27.0% in August, both consistent with a stable labor market (chart). We expect more of the same in July's JOLTS report (Tue). Employment-related stocks (ADP, Paychex, ManpowerGroup) have all rebounded from their yearly lows in spring, each up more than 45%, suggesting that the labor market is improving (chart). (2) Purchasing managers' indexes. S&P Global's flash PMIs for August suggest that the comparable ISM indexes remained strong that month for manufacturing and especially for services (chart). August's four available regional manufacturing surveys show more strength in this sector than shown by the S&P Global flash estimate (chart). S&P 500 forward earnings rose 32.1% y/y during July, suggesting more upside in the ISM's M-PMI (chart). (3) Productivity. Q2's revised nonfarm business productivity (Thu) is likely to match the preliminary increase of 2.2% y/y (chart), in line with its long-run average of 2.1%; output rose 2.5%, below its 3.4% average. On a seven-year annualized basis, we expect that the current productivity rebound will turn into a productivity boom over the remainder of the Roaring 2020s and through the Roaring 2030s (chart).
US MARKET CALL: Warsh Proof
Last Wednesday, Nvidia's earnings report came in much stronger than expected, confirming that the AI boom is still going strong. On Friday, Fed Chair Kevin Warsh was much more hawkish than expected in his Jackson Hole speech. He acknowledged that inflation remains above the Fed's 2.0% target. Overall, as we expected, these two events didn't move the markets much. The S&P 500 was up just 0.5% for the week. The 10-year Treasury bond yield fell 0.2bps last week, while the 2-year Treasury yield rose 11bps. I. Bonds In the federal funds futures market, the number of expected 25bps rate hikes over the next 6 and 12 months rose slightly to 1.5 and 2.0 (chart). The CME Fed Tool showed that the odds of a September rate hike jumped from roughly 35%-40% to 55%-60% after Warsh spoke on Friday. Warsh still has a credibility problem. He has talked the talk about the need for the Fed to bring inflation down to its 2.0% target, but he has yet to walk the walk. As noted above, the 10-year Treasury bond yield fell 0.2bps last week, while the 2-year Treasury yield rose 11bps (chart). So the yield curve flattened a bit. Despite all the commotion in the bond market since US Treasury Secretary Scott Bessent intervened with Japanese authorities to support the yen on July 31, the 10-year yield remains in our "normal-for-longer" range of 4.00%-5.00%. Despite concerns about the surge in bond supply from hypersalers, spreads between corporate bond yields and the 10-year Treasury yield remain low (chart). II. Stocks The S&P 500 has been volatile this year (chart). The war in the Middle East during March depressed stock prices as oil prices soared (chart). Since then, the conflict's de-escalation has lifted stock prices this spring. During the summer, stock prices have been relatively flat. The S&P 500 is back on track compared with its average performance from 2016 to 2025. If it remains on that track, it would end the year at 8,146. We are still targeting 8,400 for year-end 2026. We doubt that one or two Fed rate hikes will derail our target. Despite the recent rally in the Magnificent-7 ETF, it still lags the Impressive-493 ETF since the start of this year (chart). Investors are suffering from AI fatigue and are moving into the stocks of companies they understand and that might benefit from AI III. Earnings S&P 500 forward earnings per share rose to yet another record high last week at $396.05 (chart). By definition, it will converge to match the analysts' consensus 2027 earnings estimate by the end of this year, which is currently at a record high of $412.46. We think both will hit $415 by year-end, taking the S&P up to 8,400 (with a 20.2 forward P/E). Forward earnings for the S&P 400 and S&P 600 also have been rising to record highs still (chart). IV. Valuation & Sentiment This year, the forward P/Es of the major stock market indexes have declined as actual and expected earnings rose faster than stock prices (chart). Our two favorite bull-bear ratios remain relatively neutral (chart). These contrarian indicators aren't providing strong buy or sell signals. V. Commodities In his speech on Friday, Warsh noted that commodity prices may be putting some upward pressure on inflation. Grain prices jumped last week on mounting concerns that Russia is disrupting grain exports from Ukraine (charts). The gold price fell $160 per ounce on Friday after Warsh's hawkish speech that morning (chart). It is back down slightly below its 200-day moving average. We are still targeting $5,000 by the end of this year, reflecting our expectation that any price dips will be short-lived. That’s because we think several central banks would view dips as buying opportunities in their attempts to rebalance their international reserves away from the dollar and toward gold.
AI Buildout Is Stimulating The Economy
Nvidia's Q2 earnings report suggests that the AI spending boom is broadening. The company forecast 70% revenue growth next fiscal year, far above Wall Street's 45% expectation, and said growth would be even stronger if supply constraints were less severe. Significantly, non-hyperscaler revenue grew 138% y/y, outpacing hyperscaler revenue growth of 102% y/y, as demand broadened beyond mega-cap tech into AI-native startups, sovereign cloud builds, and traditional enterprise IT. Such a strong outlook from the company at the center of the AI ecosystem is a powerful vote of confidence in the AI spending boom. As CEO Jensen Huang put it, the "AI infrastructure buildout is at full steam." That suggests AI-related investment should remain a significant tailwind for both economic and earnings growth: (1) Earnings. AI spending is already showing up broadly in the economy and in earnings. S&P 500 Information Technology forward earnings is up 81.9% y/y, more than double the 36.0% gain for the S&P 500 as a whole. Other sectors tied to the AI buildout (including Industrials, Materials, and Communication Services) are showing robust growth too (chart). Industry analysts expect the strength to persist, with Information Technology's long-term earnings growth (LTEG) forecast at 41.7%, well ahead of the S&P 500's 25.0% (chart). The other AI-related sectors are also expected to show double-digit LTEG in the mid- to high teens. (2) Durable goods. The AI buildout is also showing up clearly in macroeconomic data. July durable goods orders rose 1.1% m/m, beating expectations and marking the fourth increase in the past five months. Excluding transportation, orders increased 0.4%, while core capital goods orders (nondefense ex-aircraft), a key gauge of business investment, rose 0.2% m/m and 12.9% y/y (charts). Core capital goods shipments, which feed directly into GDP, jumped 1.4% in July. The major components of durable goods orders are at record highs (chart). Orders for machinery necessary to construct and operate data centers remain very strong (chart). Unfilled orders for computers and electronic products rose to a record $158.9 billion in July (chart). (3) Regional business surveys. Four of the five regional business surveys conducted monthly by five of the 12 Fed district banks are now available for August. The Regional Manufacturing PMI rose to 20.5 in August, its highest reading since late 2021, suggesting that the national ISM M-PMI likely remained comfortably in expansion territory during the month (chart). (4) GDP. Based on recently released data, the Atlanta Fed's GDPNow model estimates Q3 real GDP growth at 4.6% (saar), up from 4.0% previously. Consumer spending growth was revised up to 3.1% from 2.5%, while gross private domestic investment was raised to 14.5% from 13.7% (chart). (5) Labor market. Private employers added an average of 11,750 jobs per week in the four weeks ending August 8, up from 9,500 in the prior four-week period, according to ADP (chart). The data point to a second straight week of hiring improvement. The latest weekly jobless claims data confirm that layoffs remain low (chart). Consumers are also feeling more optimistic about the labor market. The share of consumers saying jobs are plentiful edged higher in August, while fewer reported that jobs are hard to get (chart). Furthermore, 53.5% of consumers said jobs are available, remaining above the historical average of 48.3%.
Archive
Our Research Library
19 years of daily research, charts, and analysis
Topics
QuickTakes Topics
Timely commentary covering the most important market themes
Charts
Find Any Chart in Seconds
Search across 7,618+ real-time charts with instant visual previews
WELLS FARGO: STOCK PRICE (WFC)
NETFLIX: FORWARD OPERATING EARNINGS PER SHARE
GENERAL MOTORS: FORWARD REVENUES
CONOCOPHILLIPS: PRICE, FORWARD EARNINGS & VALUATION
Sample charts from our collection of 7,618+ visualizations
Tools
Research Tools
Interactive dashboards for tracking economic conditions and market trends
Beige Book Monitor
Fed economic conditions across 12 districts with traffic-light signals.
FOMC Policy Meter
Dovish-to-hawkish policy stance tracker across FOMC meetings.
FOMC Minutes Monitor
Hawk/dove signal extraction across 10 economic themes.
FOMC SEP Monitor
Fed projections and dot plot distributions across meetings.
FOMC Statements
Every FOMC policy statement since 1997 — full text, rates, and voting records.
Private Credit Monitor
Auto-updating chronology of the private credit liquidity crisis.
Release Calendar
Major publications from the Fed, ECB, IMF, and 12 global institutions.
Try Yardeni Research free for four weeks.
Full access to everything we publish. No credit card, no obligation.