Canada To Drop 25% Tariff On Some U.S. Imports: Source — Update

Economic

Summary:

Canada on Friday will remove its 25% tariff on about half of the U.S. goods it has targeted since March, according to people familiar with the matter, as a sign of goodwill from Ottawa as it tries to reset its trading relationship with the U.S.

However, Canadian tariffs on U.S. steel, aluminum and automobiles would remain in place, these people said. Overall, the decision affects about $21 billion of U.S. exports to Canada, on goods such as orange juice, peanut butter, wine, spirits, beer, appliances and motorcycles.

The move comes the day after Prime Minister Mark Carney and President Trump spoke for the first time since the two countries failed to reach a trade deal prior to an Aug. 1 deadline. In a summary of the call released by Carney's office, the conversation was described as "productive," and the two leaders pledged to reconvene on trade.

Canada is the lone Group of Seven economy that has failed to reach a tariff deal with the U.S. before Trump's deadline.

Carney is scheduled to hold a press conference at noon ET. Earlier this month, he said that the government may remove some tariffs on U.S. goods as a way of helping domestic industries. The U.S. exempts Canadian imports from its 25% tariff so long as they comply with the terms in the U.S.-Mexico-Canada free trade treaty, known as USMCA.

Last week, the U.S. Ambassador to Canada, Pete Hoekstra, said the Canadian government's retaliatory tariffs against the U.S. and decisions to either ban or reconsider the purchase of U.S. goods threaten the future of the existing USMCA trade treaty.

"Canada is calling into question the future of" USMCA, Pete Hoekstra said.

Carney's decision, to be formally unveiled later Friday, drew immediate praise from former senior Canadian officials.

"Canada retaliating alone wasn't working," said Brian Clow, a senior adviser on U.S.-Canada relations to former prime minister Justin Trudeau. "For retaliation to work, the world needed to stand together and stand up to Trump. That didn't happen so here we are."

Source: TradingView

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Winkelmann

Economic

Stocks

Political

Slow productivity growth is now recognised as not requiring tight monetary policy to keep demand in check. But what if tight monetary (and other) policies make productivity worse?

● Traditionally, economic theory has assumed that monetary policy is ‘neutral’ in the long run. That is, it can affect inflation, and short-run fluctuations in growth and the labour market but it has no implications for growth or unemployment in the long run. In Australia, the standard discourse also assumes that productivity growth is more or less fixed, or else determined by government policy. And until recently, it was assumed in many quarters that weak productivity growth meant that demand had to be constrained – by monetary and other policies – to match the weak growth in supply.

● What if we have it all backwards? A growing body of research suggests that tight monetary policy can in fact reduce long-run growth. One way this might happen is that by slowing demand, tight monetary policy reduces the incentive to invest, and thus the future capital stock and future productivity. This is on top of the ‘scarring’ effects on workers that we normally think of as long-run effects of recessions.

● We should not pick only on monetary policy here. Policies that reduce the incentive to invest in the right labour Skills and Smarts or labour-saving Stock of capital reduce future productivity growth. More broadly, we need to remember that Skills and Stocks are stocks, not flows. Short-run changes to the stock of something – whether a workforce, a capital stock or a housing stock – can have long-lasting effects on economic outcomes.

This week’s Productivity Roundtable (together with the pre-roundtable roundtables that preceded it) responds to growing concerns about slow growth in productivity and thus potential growth. There are many ways to boost potential growth: the Treasury ‘Three Ps’ of Population, Participation and Productivity. Recall that only the latter two unambiguously boost living standards, along with Price: what we get for what we sell to the world relative to how much we pay for the things we buy from the world. The recent downward revisions to the RBA’s assumptions about potential growth look to be equally split between a slowdown in trend growth in labour productivity (from 1.0%yr to 0.7%yr) and a slower rate of population growth (1.2%–1.3%) compared with the 1.5–1.6%yr rates typical in the years before the pandemic.

Recall also that labour productivity comes from labour Skills, the Stock of capital, and the Smarts involved in putting the two together (multifactor productivity). Any of the deeper drivers of productivity – be it the level of competition, regulation, technology or tax – work through one or more of these three aspects of productivity.

It has long been known that deep downturns stemming from wars and financial crises have long-running effects on future growth potential. Destruction of capital, or lack of funding for investment both weigh on the capital stock. This is on top of the long-recognised effects of deep downturns on the labour market – the ‘scarring’ effect of long-term unemployment, or of entering the labour market at the wrong moment.

More recently, it has been recognised that this kind of path dependence does not only apply to the deep downturns borne out of crisis. Some research finds that downswings in the business cycle more generally do not end with a strong cyclical bounce-back to the prior trend. It can be a slow grind, never quite getting back to the previous path.

A growing body of research (for example, here, here, here and here) also suggests that tight monetary policy affects potential growth and productivity. One way this can happen is by influencing investment decisions, which would add to the capital stock. While studies do not typically find that the level of interest rates helps predict investment directly, it does affect the level of demand. This in turn affects investment because there has to be a market for the output to make the investment worthwhile. A separate but related mechanism involves the re-allocation of capital to the most productive uses.

We can see, then, why an extended period of weak demand is so toxic: by discouraging current investment or shifts of capital into the most productive uses, it reduces the capacity to meet future demand. The fires of recession (and plain old soggy growth) are not cleansing – they are just destructive. Unfortunately, the same literature generally finds that loose monetary policy does not directly add to capacity in the long run, though a short-run boost to productivity from reallocation is implied by some models.

This is why the RBA’s pivot to no longer believing that weak productivity growth requires it to tamp down demand is so consequential – and so welcome. That change of heart avoids what could have become a significant policy error.

We should not only pick on monetary policy here. Other policies might also contribute to a low productivity growth malaise. Consider the skilled migration program. While it is widely admired as being targeted on skills shortages and effective in its operations, an issue arises where a skill shortage is defined to be any moment where you cannot find the right person at the current wage. If you can obtain an essentially infinite supply of people with the necessary skills from offshore at the current wage rate, why try to entice the local worker with a somewhat higher wage? And more to the point, why train local workers, or invest in labour-saving capital when you can always get someone from offshore at the current wage rate?

This suggests that it would help to set the bar for defining a skills shortage higher than the current wage rate. That would let local market forces take some of the adjustment. It would also ensure that firms sometimes have an incentive to invest in labour-saving technology – the Stock of capital – or better processes – the Smarts around how labour and capital combine.

The broader point here is that policy discussions need to allow for long-running consequences coming from things that are a stock – a quantity at a point in time like the number of workers with a particular skill, or the number of homes – rather than a flow, such as the amount of consumer spending in a quarter. The Stock of capital and the Skills of workers are stocks of this kind. The Smarts of the way we design our business processes are also long-lasting. Flows, by contrast, are inherently more ephemeral.

Getting things wrong with the stocks is far more consequential than the problems that many current policy proposals are designed to fix.

Source: ACTIONFOREX

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Olivia Brooks

Economic

China–U.S. Trade War

Canada will announce on Friday that it is removing many retaliatory tariffs on U.S. goods as a goodwill gesture designed to restart stalled trade talks, a source familiar with the matter said.

Canadian tariffs on U.S. autos, steel and aluminum will remain for now, said the source, who requested anonymity given the sensitivity of the situation.

Prime Minister Mark Carney is scheduled to give a press conference at noon Eastern Time (1600 GMT) on Friday.

The news helped the Canadian dollar extend its gains and by 11:05 a.m. it was up 0.5% at C$1.3837 to the U.S. dollar, or 72.27 U.S. cents.

Canada has been holding talks with the United States on a new economic and security relationship for months but the two sides are not close to a deal.

Carney spoke to U.S. President Donald Trump on Thursday for the first time since June and held what his office called a productive conversation.

Carney's office did not respond to a request for comment.

Source: Reuters

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Warren Takunda

Economic

The Federal Reserve is gearing up to resume cuts to interest rates, its chair, Jerome Powell has signaled, as he warned Donald Trump’s tariffs and immigration crackdown had roiled the global economy and hit the US workforce.

For months, Powell has ignored demands from the president to cut interest rates and defied the US president’s calls to resign. But as Trump ramps up his extraordinary attack on the Fed’s independence, Powell suggested on Friday that Fed officials are considering a rate cut.

“With policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance,” Powell said in a closely scrutinized speech at the Jackson Hole symposium in Wyoming on Friday, highlighting a “challenging” dichotomy of risks: that Trump’s tariffs might increase inflation, while his immigration policies knock the US labor market.

Trump, meanwhile, continues to encroach on the Fed’s independence and demand that it rapidly cuts rates. The president called on a Fed governor, Lisa Cook, to resign after one of his allies, the US Federal Housing Finance Agency head, Bill Pulte, alleged that she had committed mortgage fraud.

After Cook said she had “no intention of being bullied” into stepping down, Trump told reporters in Washington on Friday: “I’ll fire her if she doesn’t resign.”

Since Trump started his second term and overhauled America’s trade system, Powell – who is usually reserved about making direct comments on executive branch policies – has been more outspoken about the impact of Trump’s tariffs.

“This year, the economy has faced new challenges. Significantly higher tariffs across our trading partners are remaking the global system,” Powell said in his speech on Friday. “Tighter immigration policy has led to an abrupt slowdown in labor force growth.”

Changes to tax, spending and regulation may also affect the economy, Powell added, tacitly underlining the erratic nature of government by Trump. “There is significant uncertainty about where all of these policies will eventually settle and what their lasting effects on the economy will be,” he said.

Recent government data shows that US labor growth stalled this summer. While new jobs are still being added to the economy each month, Powell noted that it was “a curious kind of balance” where both the supply and demand for workers have been slowing.

“This unusual situation suggests that downside risks to employment are rising. And if those risks materialize, they can do so quickly in the form of sharply higher layoffs and rising unemployment,” he said.

Cutting rates could help boost the labor market, but it can also make inflation worse. Powell pointed out that Trump’s tariffs have “begun to push prices up in some categories of goods”.

“The effects of tariffs on consumer prices are now clearly visible. We expect those effects to accumulate over coming months, with high uncertainty about timing and amounts,” Powell said.

It is unclear whether tariffs will cause lasting inflation, meaning prices will continue to go up at higher paces, or if it will mean a one-time shift in the price level. Fed Chair Jerome Powell Signals Interest Rate Cuts Amid Trump Attacks_1

Fed Chair Jerome Powell Signals Interest Rate Cuts Amid Trump Attacks_1

At five consecutive meetings, the Fed has left rates unchanged, despite the president’s calls for rapid cuts. Before moving, most policymakers wanted more clarity on the economic impact of his policies, including sweeping tariffs on imports, and deportations.

At the Fed’s last meeting, in July, where it again opted to leave its benchmark interest rate unchanged, two governors opposed the decision – the first time multiple governors have voted against the majority since 1993.

After the meeting, official employment data showed that jobs growth stalled this summer – prompting Trump to fire the federal official in charge of labor statistics – as inflation continued to rise.

A parade of those aspiring to replace Powell next year – believed to include the two governors who called for rate cuts at the last Fed meeting, Christopher Waller and Michelle Bowman, and Kevin Hassett, the director of Trump’s national economic council – will be interviewed in the coming weeks.

Source: Theguardian

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Adam

Economic

Nvidia Corp. has instructed component suppliers including Samsung Electronics Co. and Amkor Technology Inc. to stop production related to the H20 AI chip, the Information reported, citing unidentified sources.

Nvidia issued those orders this week after Beijing urged local companies to avoid using the H20, the Information said, referring to a chip designed specifically for the Chinese market. The US company’s shares slid about 1.3% in US pre-market trading.

A production suspension would raise questions about fundamental demand for the H20, a less-powerful version of Nvidia’s cutting-edge AI accelerators that competes with similarly capable chips from the likes of Huawei Technologies Co. and Cambricon Technologies Corp. The latter company’s shares soared as much as 20% Friday, leading a rally in fellow Chinese chip stocks.

Nvidia and Advanced Micro Devices Inc. both recently secured Washington’s approval to resume lower-end AI chip sales to China, on the controversial and legally questionable condition that they give the US government a 15% cut of the related revenue. But their Chinese customers are under pressure to adopt homegrown chips instead — part of a broader objective to build a world-class domestic industry and wean the country off US technology.

In past weeks, Chinese authorities have sent notices to a range of firms discouraging use of the less-advanced semiconductors, Bloomberg News has reported. That followed warnings about alleged security risks in the H20, after Washington officials said they were considering ways to equip chips with better location-tracking capabilities.

The scrutiny coincides with the growing capabilities of homegrown alternatives to Nvidia designed by Huawei and its peers. On Thursday, Chinese AI phenomenon DeepSeek said its latest AI model was customized to work with next-generation Chinese-made AI chips, without elaborating.

Chief Executive Officer Jensen Huang on Friday said he was surprised when Beijing expressed those concerns and was now addressing that in talks with the authorities. But he reiterated that the H20 houses no such security backdoors. Huang, who was in Taiwan to discuss his upcoming Rubin chip with Taiwan Semiconductor Manufacturing Co., said Nvidia’s also in talks with Washington about a potential follow-up to the H20 for China, though that depended on the Trump administration.

“Offering a new product to China for AI data centers — the follow-on to the H20 — that’s not our decision to make. It’s up to of course the US government,” Huang told reporters during an impromptu briefing at the airport. “We’re in dialogue with them but it’s too soon to know.”

What Bloomberg Intelligence Says

Nvidia’s decision to halt H20 chip production, as reported by The Information, follows the Chinese government urging local companies to avoid using the chip and creates fresh uncertainty over when Nvidia’s China business can recover. We had previously projected H20 shipments to China would resume no earlier than the end of this year. Although a delay might temper optimistic estimates for China, robust US hyperscaler demand and Blackwell adoption should offset the impact on Nvidia this year.

- Kunjan Sobhani and Oscar Hernandez Tejada, analysts

Click here for the research.

It’s unclear whether the Information’s story relates to new production of the H20 or stockpiles of unfinished AI accelerators.

Semi-finished semiconductors are “piling up” at Amkor, which packages chips for customers like Nvidia, the Information reported. Representatives for Amkor didn’t immediately respond to requests for comment after normal hours. A Samsung representative declined to comment.

Nvidia, which wrote off $5.5 billion of H20 chips for China after the Trump administration decided to ban the product, is still sitting on unsold inventory. Huang has said the US reversal of that ban over the summer could help Nvidia recover some but not all of that writedown.

Nvidia Asks Suppliers to Halt H20 Work, Information Says_1

Cambricon Shares More Than Double From July Low

Nvidia — which is due to report earnings next week — has repeatedly denied it builds backdoors or location-tracking into its product. “We constantly manage our supply chain to address market conditions,” an Nvidia spokesperson said in response to the Information report.

“As both governments recognize, the H20 is not a military product or for government infrastructure. China won’t rely on American chips for government operations, just like the US government would not rely on chips from China. However, allowing US chips for beneficial commercial business use is good for everyone.”

Source: Bloomberg

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ING

Economic

Commodity

Russia-Ukraine Conflict

Political

Energy

Oil prices moved higher yesterday as the initial enthusiasm over progress towards a ceasefire between Russia and Ukraine continues to fade. It’s proving difficult to set up a Putin-Zelensky summit, while discussions around potential security guarantees face obstacles. Russia suggests, for example, that it should be part of any security guarantees for Ukraine. Not helping matters is Russia launching its largest strike on Ukraine in over a month. The less likely a ceasefire looks, the more likely the risk of tougher sanctions.

Meanwhile, President Trump’s trade advisor, Peter Navarro, said he expects that secondary tariffs on India for its purchases of Russian oil to go ahead next week. An additional 25% tariff is set to come into effect on 27 August. While Indian refiners initially took a step back from buying Russian crude when these tariffs were announced, reports are that attractive discounts have Indian refiners showing increased interest once again. This poses upside risk for the oil market. If tariffs push India away from buying Russian oil, and Russia can’t divert this supply to other buyers, domestic producers would be forced to reduce supply. However, this is less of a concern if India continues with its Russian crude purchases.

This week has also seen a further easing in the tightness in the middle distillate market. Yet the gasoil crack has strengthened this week, along with the prompt ICE gasoil timespread. This comes amid some refinery outages. Gasoil inventories in the Amsterdam-Rotterdam-Antwerp (ARA) region increased by 170kt WoW to 2.03mt, helping to take stocks closer towards the seasonal 5-year average. Meanwhile, middle distillate stocks in Singapore increased by 371k barrels. Increases in ARA and Singapore follow a 2.34m barrel increase that the Energy Information Administration (EIA) reported earlier this week in US distillate stocks.

European gas prices rallied yesterday. The Title Transfer Facility (TTF) settled close to 4% higher as attention increasingly turns to upcoming maintenance work in Norway, which will lead to lower Norwegian flows to Europe. EU gas storage is close to 75% full at the moment, lagging the 5-year average of 82% and well below last year’s level of 91% full. European prices will need to remain competitive relative to Asia to ensure enough LNG heads to Europe ahead of the next heating season. However, LNG send-outs in Europe have been trending lower since peaking in June.

Source: ING

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Adam

Economic

The latest economic data suggests the US economy is decelerating. That means growth is slowing, jobs are shrinking, and households are spending less. As we showed in a recent #BullBearReport, economic growth, inflation, and personal consumption are trending lower.

Slowing US Growth Suggests Risk to Earnings Outlook_1

Unsurprisingly, with job growth weakening, consumer sentiment also took a hit in the latest report, with future expectations remaining very weak.

Slowing US Growth Suggests Risk to Earnings Outlook_2

While the financial markets got very excited over the data, as it creates pressure for rate cuts in the US, it bodes poorly for future returns. So far in 2025, there have been 88 central bank rate cuts, the fastest cut cycle since the 2020 COVID crash. That is not a sign of burgeoning economic growth. While stocks and credit anticipate the Fed joining the easing party, the pace of cuts suggests that weakness is spreading globally.

Slowing US Growth Suggests Risk to Earnings Outlook_3

Crucially, economic growth, or the lack thereof, shapes earnings expectations and investor behavior. At first glance, it looked like the US economy was regaining strength in the latest GDP report. But the drivers of that growth tell a different story. Consumer spending rose 1.4 percent, the primary contributor.

However, this increase was funded mainly through savings depletion and increased credit usage. Real wage growth remained stagnant, which means consumers were not spending more because they earned more. They borrowed and spent their savings.

Another major contributor to Q2 GDP was a sharp drop in imports. While this technically boosts GDP, it is not indicative of economic health. Imports fell because domestic demand weakened, and tariffs continued to distort trade flows. Export growth was modest, but not enough to offset the larger picture of global trade deceleration.

Private fixed investment also declined in Q2, suggesting businesses are pulling back on capital expenditures, particularly equipment and structures. This signals reduced confidence in future demand. Inventory restocking added marginally to GDP, but with backlogs thinning and sales slowing, inventory reductions are likely in Q3 and Q4.

Furthermore, while investors are exceedingly bullish on the stock market, forecasts for the remainder of 2025 are sobering. Most projections now place US economic growth at 1.5 percent or lower in the second half. By Q4, real GDP growth could slow to below 1.0 percent year-over-year. Even the IMF, which recently produced its global growth estimates, has the US economy growing at 2% for the next two years, and the Eurozone near 1%.

As discussed above, consumer spending, the primary driver of GDP, will be constrained by slowing wage growth, high debt servicing costs, and reduced access to credit. The economy lacks alternative growth engines without a pick-up in business investment or export demand. That reduction in economic demand will translate into forward earnings expectations, requiring a revaluation of financial markets.

Slowing US Growth Suggests Risk to Earnings Outlook_4

Let’s look at some of the most recent economic data to assess the risks.

US Economic Data: Good, Not Great

July’s employment report confirmed that the slowdown in US economic growth is taking root. Nonfarm payrolls increased by a mere 73,000 jobs. Expectations were for 110,000. The bigger story is in the revisions. May and June payrolls were slashed by 258,000. That’s the second-largest two-month downward revision since the 2008 recession. When employers stop hiring and previous gains get erased, that is not a data glitch—it’s a signal.

The unemployment rate increased to 4.2 percent, while labor force participation remained at 62.2 percent. While not alarming at face value, the lack of participation growth shows that the working-age population isn’t reentering the workforce in significant numbers.

More importantly, full-time employment remains weak as a percentage of total employees, which correlates to the future direction of personal consumption expenditures and inflation. Such is unsurprising given that for individuals to consume at higher levels, they need full-time employment. Without increases in consumption, US economic growth and inflation will decline.

Slowing US Growth Suggests Risk to Earnings Outlook_6

Wage growth is also losing momentum. Average hourly earnings rose 0.3 percent month-over-month, but year-over-year gains slowed to 3.9 percent. This is a problem. Inflation is still hot in services and necessities, eroding real income growth.

Slowing US Growth Suggests Risk to Earnings Outlook_7

Consequently, households feel the pinch, and discretionary spending will reflect that in the second half of 2025. Such is particularly the case with rising delinquency rates, particularly in student loan debt.

Slowing US Growth Suggests Risk to Earnings Outlook_8

The sector breakdown of job growth shows late-cycle dynamics. Healthcare and government jobs are still being added, but these are non-cyclical. Manufacturing employment declined, reflecting weaker orders and global trade slowdowns. Professional and business services hiring has stalled.

Furthermore, the labor market is transitioning from a phase of post-pandemic recovery to a structurally slower employment cycle. Businesses are tightening labor expenses as revenue growth slows.

This is not a short-term adjustment; it’s a reset of hiring expectations across multiple sectors. If wage growth continues to moderate and hiring slows, the consumption-driven economy will lose its primary growth engine.

Data Reveals Broad-Based Slowdown

Outside the employment report, July’s ISM Manufacturing Index fell to 48.0, marking five months of contraction. New orders were sluggish, while the employment index plummeted to 43.4 percent. This reading is significant. It indicates companies are actively reducing factory jobs, not simply slowing hiring.

The problem is not isolated to manufacturing. The services sector, comprising roughly 70 percent of the U.S. economy, barely holds on. The ISM Services Index registered at 50.1 in July, down from a reading of 50.8 previously. This is technically an expansion reading, but only by the slimmest margin.

The composite index is economically weighted (70% services / 30% manufacturing). It tells us what we already suspected: that the economy is growing, albeit very slowly.

Slowing US Growth Suggests Risk to Earnings Outlook_9

The employment component of services fell to 46.4 percent. When service firms start cutting payrolls, it signifies a more profound weakness in demand. For months, services spending was the buffer against manufacturing softness. That buffer is eroding as input costs have risen. Businesses face increasing operational expenses while revenue growth stagnates, a recipe for margin compression.

This was evident already in the Q2 earnings reporting period. There would have been no earnings growth without Megacap Technology and major Wall Street banks.

Slowing US Growth Suggests Risk to Earnings Outlook_10

Industrial companies have already started guiding lower. Tariffs, higher input costs, and weakening orders are cutting into margins. Companies like Caterpillar (NYSE:CAT), Deere (NYSE:DE), and 3M (NYSE:MMM) have issued profit warnings. Consumer-facing companies are also vulnerable. Discretionary spending is slowing, and rising input costs will further squeeze margins for retailers and service providers.

While technology and AI-driven firms have recently become bright spots, their strength cannot offset broader corporate margin pressures. In Q2, S&P 500 earnings grew 6.4%, with 80 percent of companies beating estimates. But this masks a weakening breadth of growth, where earnings beats are concentrated in essentially just two sectors.

As noted, slowing economic growth will reduce earnings expectations for Q3 and Q4. Margin compression will dominate as companies with pricing power and efficient cost structures prosper while the rest struggle to meet expectations.

Investors must now consider this risk.

Investor Positioning in a Slowing Economy

The evidence points to a slowing US economy. Growth is weakening, inflation remains elevated, corporate margins face pressure, and interest rate cuts are likely. These conditions require a shift in investment strategy. Investors must adapt to preserve capital, generate income, and manage risk. Positioning should emphasize resilience, quality, and income stability. The goal is to reduce exposure to volatile sectors and concentrate on assets that perform well during economic slowdowns.

Here are key actions investors should consider:

Reduce exposure to cyclical stocks: Cut back on discretionary sectors like retail, travel, and consumer electronics that rely heavily on strong economic growth.

Increase allocation to defensive sectors: Focus on consumer staples, healthcare, and utilities. These sectors provide stable earnings even in weak environments.

Favor companies with strong pricing power: These firms can better maintain margins despite rising input costs.

Prioritize strong balance sheets: Low debt and high cash reserves reduce financial stress and support consistent returns.

Add high-quality dividend payers: Look for companies with a track record of stable or growing dividends. These provide income support as capital gains slow.

Increase fixed income exposure: Short-duration bonds and high-grade corporates may benefit from falling interest rates.

Consider yield curve positioning: A steeper yield curve from rate cuts may create an opportunity in intermediate bonds.

Avoid speculative growth stocks. These firms rely on future earnings and cheap financing, both of which are under pressure in a slowing economy.

A decelerating US economy changes the return profile across asset classes. Adjusting now to focus on quality, cash flow, and defensive positioning can improve downside protection and set the stage for more stable portfolio returns.

While there are no guarantees, the current gap between what Wall Street expects and what the economy can deliver is very different. Could the economy catch up to meet Wall Street’s expectations? Sure. It just usually doesn’t happen that way.