Executive Summary

Valuation is presenting a mixed picture. Shorter-term, the S&P 500 appears cheap, but investors increasingly believe that we’re approaching peak earnings. Longer term, blue chips are trading above the 80th percentile of their historical range, exceeded only by the tech bubble.

US economic growth is solid, as GDP expanded 4.1 per cent in Q2. Productivity, long elusive, surged to 2.9 per cent annualized for the quarter.

Liquidity measures tightened incrementally last month and could break down in the coming weeks if current trends continue.

Daunting headlines will be taking center stage now that Q2 earnings season is behind us. So far anyway investors are taking tariff news and Trump legal troubles pretty well.

Technical conditions remain in “risk-on” mode, although technicals tend to be a lagging indicator. Particularly interesting was the breakdown between emerging market equites and a breakout in small caps relative to the S&P 500.