Consumer Spending Holds Up Despite Tariff Headwinds

Over the past few weeks, U.S. retail sales have surprised analysts by rising more than expected in August. According to this article, retail sales climbed 0.6% from July, with core retail sales (excluding volatile categories like autos and gas) up 0.7%. While higher prices resulting from tariffs are partly responsible for the increase, the broader rise shows some resilience among consumers. 

However, this strength in spending is happening alongside a weakening labor market and rising cost pressures. Import prices have edged up amid tariff increases, and many economists warn that these tariff-driven price hikes could erode purchasing power over time. Wages are not rising fast enough for many, especially those with lower incomes, causing concerns that the current strength in spending may not last.

Article: US retail sales increase strongly; softening labor market a headwind By Lucia Mutikani

Link: https://www.reuters.com/business/retail-consumer/us-retail-sales-increase-strongly-softening-labor-market-headwind-2025-09-16/?utm_source=chatgpt.com

Rising Interest Rates and the Housing Market

    Over the past couple of years the Federal Reserve has been raising interest rates to slow inflation. One side effect is that mortgage rates are now over 7%, which makes borrowing a lot more expensive. That has pushed many buyers out of the market and slowed things down.

    What’s interesting is that home prices haven’t dropped as much as you’d expect. Builders still face high costs for labor and materials, and zoning rules limit new supply. So even though fewer people are buying, there aren’t enough homes to really bring prices down. 

    This leaves a lot of people stuck. First-time buyers can’t afford to enter the market, while homeowners with older low-rate mortgages don’t want to sell. It makes me wonder how long high rates can last before either construction slows way down or prices finally adjust.

Sources:

https://www.freddiemac.com/pmms

https://www.nahb.org/news-and-economics/housing-economics

Europe’s Economic Watch

Europe in late 2025 is seeing a cautious yet hopeful economic environment. While problems remain, there are signs the region is moving toward more stable ground. The European Central Bank has decided not to change its benchmark deposit rate, keeping it at 2%. Inflation in the euro-area is now around 2.1% (year-on-year for August), slightly above target but trending downward. Growth is modest, but recent data show slight upward revisions: 2025 GDP growth is now projected at 1.2%, up from earlier estimates of 0.9%. Europe is balancing inflation control with growth concerns. Persistent inflation, even at moderate levels, limits room to cut rates without risking price stability. Europe is at a crossroads where inflation is falling but not gone, growth is stable but modest, and external risks loom large. The region’s economy looks resilient in many ways but its future depends on how well policymakers navigate trade-offs and climate risks. 

Talks on Tariffs and TikTok

    Top U.S. and Chinese officials met in Madrid to extend a fragile trade truce that is going to expire in November. These talks covered tariffs, export controls, rare earth minerals, and the fate of TikTok, with tensions rising after fresh chip‑industry restrictions on both sides. China’s exports to the U.S. have fallen 15%, pushing Beijing to deepen ties elsewhere, even as it battles overcapacity at home. A potential Trump–Xi meeting at next month’s APEC summit could shape the outcome, but for now, the world’s two largest economies remain locked in a delicate balance between cooperation and confrontation.

Rappeport, A. (2025, September 15). U.S. and China hold fourth round of trade talks as TikTok deadline looms. https://www.nytimes.com/2025/09/14/business/us-china-trade-tiktok-negotiations.html

Trump Endorsed Changes to SEC Guidelines on Public Company Reports

 In a Truth Social post today, trump stated that companies should no longer be forced to report earnings on a Quarterly basis and rather on a semi-annual basis.

Trump states that: “This will save money, and allow managers to focus on properly running their companies, ... Did you ever hear the statement that, ‘China has a 50 to 100 year view on management of a company, whereas we run our companies on a quarterly basis???’ Not good!!!!”

This reflects statements made by both his opponents and large figures within the investing community, such as Jamie Dimon of JPM Chase, Warren Buffett, and Hillary Clinton. It is alleged that this quarterly reporting practice has resulted in less publicly traded companies as they don't want to have the restriction of being short term rather than long term growth.

This idea is pending SEC review, however it has been pushed for by both private and public figures, and it seems very likely that this would be approved. Some of the key drawbacks are: lack of data being reported for economists & policy makers (i.e. travel demand shifts, loan losses, and updates on innovation driven economic booms [such as AI]). "Moving to a six-month reporting period could delay those insights and exaggerate stock moves during shifts in the economy and various industries."

Source: https://www.cnn.com/2025/09/15/economy/trump-quarterly-reporting-sec-earnings 

Rise in U.S. Inflation

     U.S. inflation picked up in August, making things tricky for the Federal Reserve as it considers cutting interest rates. On one hand, slower job growth is raising concerns relating to the labor market. On the other, rising prices make the Fed cautious about moving too quickly. The latest Consumer Price Index showed inflation up 2.9% from last year, the fastest pace since early 2025. Core inflation, which excludes food and energy, held at 3.1%. Month to month, overall prices rose 0.4%, while core prices rose 0.3%, both slightly above expectations. The Fed has kept interest rates steady at 4.25%–4.5% this year after a series of cuts in late 2024. A big reason for the pause is concern over tariffs, which have driven up the costs of goods. Economist Nancy Lazar explained, “Tariffs are a tax… only companies with strong pricing power are holding up.” Several areas are fueling higher prices. Gasoline rose 1.9% in August, airfares spiked nearly 6%. New cars rose 0.3% and used cars climbed 1%, about 6% higher than last year. Housing costs went up 0.4%, and food prices increased 0.5%, with coffee alone surging 21% from a year earlier.

    There was some relief, as utility gas and certain medical goods fell in price. The labor market adds another layer of complexity. Hiring has slowed, partly due to immigration restrictions, while layoffs remain low and unemployment is holding at 4.3%. That puts the Fed in a tough spot, they can cut rates to support jobs, or they keep rates high to control inflation. In the end, the Fed is will probably take things slowly. Rate cuts could help workers, but inflation isn’t going down fast enough. For now the central bank will probably move carefully, aiming to support the economy without letting prices spiral again.

America’s economy defies gloomy expectations

 While forecasts and public beliefs expected a slowing of the economy, the U.S. economy has been steadfast and has surpassed expectations. GDP growth has become stabilized as the latest quarterly numbers showcase a higher than expected annualized increase. Fears of high interest rates have led to worries in the U.S. economy; however, strong consumer spending, strong labor market, and historically low unemployment are the key factors supporting this resiliency. Core inflation is still above the Federal Reserve's target, yet it is appears to finally be steady and under control. Three rate cuts this year are expected due to this unexpected strength of the economy which will ease this tension. Interestingly, the slow job growths, as the article states, should be taken with the context of slower population growth. The American Enterprise Institute and Brookings Institution believe the net migration number to be between -500,000 and 100,000 significantly lower than the 2 million expectation.

https://www.economist.com/finance-and-economics/2025/09/14/americas-economy-defies-gloomy-expectations

China is Ditching the dollar

     China is pushing to elevate the value of the yuan, the Chinese currency, as trust in the dollar wanes by the day. Currently, the dollar is looking weaker due to America's rising debt, political uncertainties, and some uncertainty surrounding the banks. At the same time, China has been building its own financial systems, including a dollar-free payment network and a digital yuan. China is doing this in order to make it easier for countries to trade and invest without using dollars. China has also made deals with banks and shifted much of their overseas lending into yuan rather than the dollar. This move by China allows them to stay protected from US sanctions and gives other countries a reason to use the yuan. 

    With all this being said, the yuan isn't replacing the dollar anytime soon. Only a small percentage of global payments and reserves are in yuan. The dollar is still dominant, and that's why China is pushing for other countries to issue yuan-denominated bonds, along with using their new digital payment systems. Overall, China is more focused on creating a trade world where there are several strong currencies, and hopefully for China, that includes the yuan.  

Article: China is ditching the dollar, fast

European Stocks Are Forecast to Rise 5% After 'Stellar" Start

     The European stock market had a strong start to 2025, their equities on the Continent initially have been outperforming the United States. Although, the STOXX 600 index of large European companies has nearly flat lined since March. It has been weighed down by weak corporate warnings and higher valuations. Goldman Sachs Research forecasts the STOXX 600 will rise about 5% to 580 over the next year (as of September 1). They are predicting a 12-month total return, including dividends, of 8%. 

    European's equities are relatively more expensive now then they were at the beginning of 2025. The forward price/earning ratio has risen to 14.4. This number puts European equities in the 70th percentile of there historical value range which goes back to the year 2000. The European stocks are expensive in absolute however they are still cheaper than U.S. stocks. 

    Sachs expects the euro to about 7% to 1.25 versus the American dollar over the next year. This would lead to a significant drag on European companies' as the relative value as the relative value of their sales in the US decline. This will result in domestic-focused companies will benefit. The European equity funds are now seeing inflows after having outflows from 2022-2024. The value stocks are outperforming in Europe which is the opposite than the US. Europe's growth stocks are pressured by failing USD, slower US growth, rising trade barrier, and China who is now a competitor, not a growth driver. 

https://www.goldmansachs.com/insights/articles/european-stocks-forecast-to-rise-after-stellar-start

Posted by: Chanden

Trump's tariffs are slowly finding their way into consumer prices

    U.S. inflation data released in 2025 shows that tariffs are increasingly raising the cost of goods, clothing and auto parts. Prices of apparel, audio products, groceries, new cars, furniture and hardware all grew by anywhere between 0.3%-0.8%. Coffee prices rose 3.6% from the  month as is up 20.9% from a year ago. These prices may not seem to sound dramatic but they are enough to give both consumers and federal reserve policymakers at least some cause for concern. These tariff price pressures are hurting consumers at a time where the labor market is already showing signs of concern. 

   

    Economists believe that these tariffs are hitting the middle class the hardest for their basic necessities like gas, food, clothing and housing as their continues to be a rise in cost. Trump stated that he believes the tariffs wouldn't drive inflation higher. Over the next couple of weeks, central bank officials are set two meet whether to lower their key overnight fund rate, currently around 4.3%. While the tariff driven price increase in these goods are very concerning they could just be temporary. Along with that, the federal reserve cutting rates might provide short-term relief to borrowers and keep growth moving.     

https://www.cnbc.com/2025/09/11/trumps-tariffs-are-slowly-finding-their-way-into-consumer-prices.html

BlackRock Seeks to Tokenize ETFs After Bitcoin Fund Breakthrough

 Olga Kharif, editor at Bloomberg Media, has written an article discussing BlackRock, the worlds largest asset manager exploring a revolutionary new use for blockchain and tokenization. BlackRock is exploring the possibility of tokenizing ETF's and listing them on the blockchain. This idea would revolutionize the way that exchange traded funds are traded, moving them into the blockchain era. The benefits of tokenizing assets would allow for easier access to markets, around the clock trading, and creating new uses for collateral across the crypto industry. 

BlackRock has been a leader in tokenizing assets, and sees strong potential in the future of the marketplace. In 2024 Blackrock launched BUIDL, a money-market fund which has grown to over $2 billion in value. BlackRock also released a spot Bitcoin ETF, which has become one of the most popular funds of its kind. 

There are a lot of regulatory issues that need to be resolved prior to the legalization and broad based acceptance of tokenizing assets. Currently, ETF's settle through traditional clearinghouses whereas Tokenized assets move instantly. Compliance, custody and settlement speed of deals are some of the many problems. BlackRock is moving forward with this new business function because the Trump administration has showed a willingness to test blockchain situated markets in controlled circumstances. 

https://www.bloomberg.com/news/articles/2025-09-13/warner-bros-brings-big-win-for-fallen-angel-debt-credit-weekly?srnd=phx-markets

The Hybrid Adoption Continues to Rise as People Step Away from EV

 Goldman Sachs has lowered its forecast for global Electric Vehicle adoption. They project that EVs will account for 25% of global sales by 2030 which is down from 28%, and they additionally project that by 2040 EVs will account for 52% which is down from 59%. The main two reasons of this slowdown are the early expiration of EV tax credits in the US, and also regulatory changes in the U.S. and Europe, including relaxed fuel economy standards. However, in China, the strong demand keeps its forecast unchanged. EV sales are continuing to rise their while in North America and Europe EV momentum has slowed. 

On the other hand hybrid vehicles are expected to have a gain in market share. Goldman Sachs Research sees hybrid vehicles  making a push as they project up to 12% of global sales by 2030 and 9% by 2040 both more than what they were projected in earlier forecasts. This shift benefit your traditional automakers, who can be efficient in producing a mix between hybrids and EVs. As a result of this, profit margins are projected to rise by up to 3 percentage points, which would be around 20 billion dollars in pre-tax earnings. 

https://www.goldmansachs.com/insights/articles/hybrid-adoption-to-rise-as-electric-vehicle-momentum-slows