In this timely market update, Chief Investment Strategist Jack Ablin, Chief Investment Officer Mike Silverman, and Founding Partner & Co-Chairman Doug Regan explored an economy that remains resilient, even as important pressure points begin to emerge beneath the surface. The conversation examined a more cautious consumer, the extraordinary scale of AI-related investment, evolving risks in interest rates and geopolitics, and the strength of corporate earnings supporting markets today. Throughout the discussion, the team emphasized the importance of looking beyond headline data to understand where momentum remains durable, where vulnerabilities are building, and where new investment opportunities may be taking shape.
Key Topics
A Consumer Still Spending, but Under Pressure
Employment remains relatively strong, but slowing job creation, weaker wage growth, declining savings, and softer confidence suggest consumers are becoming more cautious. The discussion also highlighted the increasingly K-shaped nature of spending, with higher-income households continuing to provide meaningful support to the economy.
AI Spending as an Economic Engine
Significant investment in data centers and AI infrastructure continues to support construction, employment, and broader business spending. At the same time, the scale of this buildout is beginning to place greater demands on free cash flow and financing, creating a more complex picture for investors.
Financial Engineering and Concentration Risk
As hyperscalers expand their AI investments, the team examined off-balance-sheet liabilities, rising debt, reduced share buybacks, and the increasingly interconnected ecosystem among a small number of major technology companies. While the long-term opportunity may remain significant, not every participant is expected to emerge as a winner.
Earnings Remain a Support for Markets
Corporate earnings continue to provide support for equities, although some reported gains reflect non-cash investment appreciation rather than core operating performance. Even after adjusting for those effects, underlying earnings growth remains positive.
Interest Rates as a Key Risk
Rising long-term Treasury yields emerged as one of the important risks to watch. Higher real rates could pressure valuations, influence institutional asset allocation, and signal growing concern about the country’s long-term fiscal position.
Geopolitics, Energy, and Global Supply Chains
The team discussed the resilience of global energy markets amid disruption in the Middle East and the Russia-Ukraine war, including shifts in oil flows, refining capacity, and the use of the Strategic Petroleum Reserve.
Where Opportunity May Be Emerging
Rather than focusing solely on which AI platform or hyperscaler will win, the team pointed to potential opportunities in the infrastructure surrounding the AI buildout, including power, water, electrical contractors, and other businesses supporting data center expansion.
A Constructive but Selective Market Outlook
While valuations remain elevated and risks persist, economic resilience, liquidity, earnings momentum, and the relatively quick recoveries from recent market corrections continue to support a measured approach to risk-taking.
