Weekly Research Briefing: My Sweet Wyoming Home

“I try to be as forward looking as possible. Over the last two months, I’ve been revising my assessment of potential weakness the labor market slightly higher. I have revised my assessment to the persistence of inflation slightly lower,” he said. “I don’t want to prejudge the meeting, because I feel my responsibility to the public to continue to update my outlook and balance of risks with new information data.”

That said while there are "downside risks for the labor market," he noted inflation is running near 3% and while tariff inflation pressures should fade in 6-9 months, “the data is beginning to give us some indication as to whether the possibility of more persistent inflation is there.”

San Francisco Fed President Mary Daly pushed back against the need for an interest-rate cut of a half percentage point, or 50 basis points, at the Federal Reserve’s September meeting.

“Fifty sounds, to me, like we see an urgent—I'm worried it would send off an urgency signal that I don't feel about the strength of the labor market,” Daly said in an interview Wednesday. “I just don’t see that. I don't see the need to catch up.”

Daly supported the Fed’s decision last month to hold rates steady. She has since indicated she would support a September cut because inflation pressures haven’t been as stiff as feared and job-market conditions have softened.

Daly said she had stopped describing the labor market as solid after the July payrolls report, which sharply revised down employment gains for previous months. Other data suggest layoffs remain low, but people who lose jobs spend longer out of work.

The labor market “is not bad right now," but “you know the direction of change is going the wrong way,” she said. “We can't simply ignore that it is softening.”

“Policy is likely to be too restrictive for where the economy is headed. So for me, that calls for recalibration,” she said. Daly favors moving gradually to a more neutral setting “over the next year or so.”

Federal Reserve Bank of Atlanta President Raphael Bostic said he continues to see one interest-rate cut as appropriate in 2025 if the labor market remains solid.

“For the rest of this year, I still have one cut on my outlook,” Bostic said Wednesday during an event in Red Bay, Alabama. “That also is predicated on the notion that labor markets stay solid. If they weaken considerably, that balance of risks starts to look differently and the appropriate path will look different as well.”

Policymakers should “reserve judgment” until other reports, including a different measure of wholesale prices due for release Thursday, would show similar dynamics over the coming months, Goolsbee told reporters on Wednesday. But rising prices for services would be a concern because they aren’t likely to reflect possible one-time effects from tariff increases. If services inflation persisted, “we would have a hard time getting back” to the Fed’s 2% inflation goal, Goolsbee said.

“We had a couple of months of quite mild and favorable inflation readings, and now we’ve gotten, let’s call it one month, where there are some concerning elements,” he said.

Some Fed officials have said they’re more open to cutting interest rates because of evidence that tariff-related price increases are being absorbed in the supply chain in ways to prevent a swift rise in consumer prices.

But Goolsbee signaled greater cautiousness. He said he wasn’t ready to declare higher goods prices from tariffs a one-time phenomenon because of how tariff increases are being phased in at different times for different products, including for intermediate goods such as semiconductor imports.

Kansas City Fed President Jeff Schmid, an FOMC voter this year, prefers keeping rates where they are:

"I see no possibility that we will know the effect of the tariffs on prices, either as a one-off shock to the price level or a persistent inflation impetus, over the next few months. Also, I promise that you will not hear me talking about inflation excluding tariffs, which I think is neither a meaningful nor a measurable concept."

"I am anticipating a relatively muted effect of tariffs on inflation, but I view that as a sign that policy is appropriately calibrated rather than a sign that the policy rate should be cut."

"With the economy still showing momentum, growing business optimism, and inflation still stuck above our objective, retaining a modestly restrictive monetary policy stance remains appropriate for the time being."

"While monetary policy might currently be restrictive, it is not very restrictive."

"Given recent price pressures, a modestly restrictive stance is exactly where we want to be."

"With stock prices near record highs and bond spreads near record lows, I see little evidence of a highly restrictive monetary policy." ‬‬

@wallstengine: Goldman Sachs now sees Jerome Powell and the Fed cutting rates by 25 bps at all THREE remaining 2025 FOMC meetings — Sept, Oct, and Dec — and another two cuts in 2026, bringing the terminal rate to 3–3.25%

@KevRGordon: The unemployment rate for 16-24-year-olds is up to 10%. Earlier this year, its 2-year change got up to +3% ... first time in history we've seen that much of an increase without the economy being in a recession

@RenMacLLC: Signs that labor market conditions continue to cool off. In July, the Indeed Wage Growth Tracker slowed to 2.4% in July, the weakest in five years. Wage growth in job postings tends to lead actual wage and salary growth.

@RenMacLLC: Homebuilder sentiment remains stuck in the basement. The NAHB Housing Market Index slid to 32 in August from 33 in July. This survey includes many small (non-public) homebuilders. Not exactly an encouraging sign for single-family housing starts.

@LizAnnSonders: Significant slowdown in retail sales growth for restaurants and bars ... 3m average barely positive in July

The producer-price index (PPI) in July rose 0.9% in the month and 3.3% over the last year. Consumer-price data released Tuesday (0.2% monthly and 2.7% for the last 12 months) implied households weren’t experiencing tariff-induced price increases, except in some services such as medical care. The PPI numbers tell us this is partly because companies are paying higher prices but haven’t passed them on to customers—yet.

The producer-price data get worse the closer you look. Goods and services both experienced substantial inflation, of 0.7% and 1.1% month-on-month respectively. Goods and services related to business investment in particular are becoming pricier, with the cost of manufacturing equipment rising 0.4% in one month and related services 4.5%.

Prices for intermediate goods—components and raw materials—are also on the rise. Prices for materials used in durable-goods manufacturing increased 1.3% in a single month, and components for manufacturing increased 0.4% in the month.

This hasn’t shown up in consumer prices so far because many companies entered the Trump tariff era with large cash reserves or wider margins, so they can absorb these costs for the time being. But these companies can’t do this forever. Meanwhile, cash lost to paying tariffs or paying tariff-induced higher prices isn’t available for reinvestment in the business, or to return to shareholders.

B of A: Data-center electricity demand is contributing to the jump in your electric bill — a 5.8% increase in electricity prices year-on-year, more than double the overall CPI increase of 2.7%.

@JoePompliano: Peacock just implemented price increases across all its plans. Someone's gotta pay for that $2.5 billion NBA deal!

U.S. companies are bracing for double-digit cost increases for their employee health care in 2026.

A new survey from the International Foundation of Employee Benefit Plans found that companies project their median health-care costs will rise 10% next year. That's up from the 8% increase respondents to a comparable survey last year said they expected for 2025.

The biggest factors driving up health-care costs for employers? According to the survey respondents, it's catastrophic claims, with 31% identifying that reason, up from 20% last year, followed by an increase in specialty and costly prescription drugs, at 23%, which is up from 20% last year…

“The 10% projected increase is attributed to a variety of factors impacting organizations’ medical plan costs, with catastrophic claims and specialty/costly prescription drugs topping the list,” said Julie Stich, vice president of content at the International Foundation of Employee Benefit Plans. “Employers have indicated that cost-sharing, plan design and purchasing/provider initiatives will be the most impactful techniques to manage costs.”

"For example, our clients needed a solution as they experienced the impact of the rapid growth in the use of GLP-1s. Spending in this category for our employer clients has nearly doubled over the last 2 years and now represent 15% of their pharmacy costs." — CVS Health CEO David Joyner

Ok, But If I Buy A Bottle of Burgundy, France Is Paying The Tariff, Right?

Nope. While Trump has long claimed that foreign companies pay tariffs, that’s almost never the case. The new tariffs will effectively function as a 15 percent sales tax on your wine. When the wine arrives in U.S. ports, the importer must pay the tariff to get the wine out of customs. So a bottle they paid the winery $20 for now costs them $22.50. As the wine goes through a wholesaler and then a retailer or restaurant, they all add their markups. When that wine arrives on store shelves, it’s probably gone from $40 retail to $45. Higher markup at restaurants means it will be even pricier…

And here’s another wrinkle—the dollar has been losing value since the trade wars began. On January 12, $1 was worth €0.98. As of July 27, it had fallen to €0.85. That exchange rate is effectively making European wines another 10 to 15 percent more expensive to American consumers.

Canada’s prohibition on U.S. alcohol is creating a headache for American liquor and winemakers.

On the shelves of many Canadian liquor stores, bottles of Jack Daniel’s, Maker’s Mark and Sailor Jerry Spiced Rum are nowhere to be found. Thousands of bottles of U.S. wine and spirits sit in storage across the country. At tastings, Canadian drinkers are turning their noses up at American alcohol.

After President Trump initiated a series of trade battles with Canada earlier this year, Canadian provinces, which largely handle alcohol imports and distribution in the country, stopped placing orders for American-made spirits, beer and wine. In liquor stores, clerks pulled U.S. brands off shelves, replacing them with Canadian products.

Mike Brisebois, who runs a digital magazine called The Whisky Explorer, held a tasting in June where he served only Canadian, Irish and Scotch whiskies—on the recommendation of his guests. “The general theme was that they were boycotting the U.S.,” he said.

Memphis-based International Paper Co., one of the world’s largest pulp and paper companies, reported a 5% drop in daily US box shipments in the quarter from the same period a year ago, while packaging giant Smurfit Westrock Plc, based in Dublin, saw a 4.5% slide in North American corrugated cardboard volumes, the biggest drop across all of the regions it operates. “If volume picked up in the United States, that would give us more confidence, but we haven’t seen that yet,” Chief Executive Officer Anthony Smurfit said on a recent earnings call…

Smurfit Westrock just announced plans to shutter an older mill in Iowa, while International Paper earlier this year said it would close four facilities, including a Louisiana mill that makes containerboard—the brown paper that goes into making a box. The company had been the seventh biggest employer in Louisiana’s Natchitoches Parish—so vital to the region that a local school board shut down two schools as a result of the lost tax dollars from the closure. “There’s just some economics to this, and International Paper has to look at their business model,” says Ronnie Williams Jr., the mayor of nearby Natchitoches city, whose father and grandfather both worked at the mill during its 50 years of operation.

@wallstengine: Goldman Sachs data shows a divergence in 2026 EPS revisions: the Magnificent 7 are seeing strong upward upgrades, while the other 493 S&P 500 names remain in negative territory with only a modest recovery.

@lisaabramowicz1: Investment-grade credit spreads are the tightest since 1998, with investors accepting less and less extra yield over government rates as the year has gone on.

I consider tactical actions in terms of the spectrum that runs from aggressiveness to defensiveness, and when valuations are high, I consider becoming more defensive. In the “action shows” my wife, Nancy, and I like to watch, the Pentagon sometimes announces a Defense Readiness Condition, starting at DEFCON 5 and escalating as the danger grows to DEFCON 1, which indicates a nuclear attack is underway or imminent. In a similar vein, I think of progressively applying the following Investment Readiness Conditions, or INVESTCONs, in the face of above average market valuations and optimistic investor behavior:

In my view, it’s essentially impossible to reasonably reach the degree of certainty needed to implement INVESTCON 3, 2, or 1. Because “overvaluation” is never synonymous with “sure to go down soon,” it’s rarely wise to go to those extremes. I know I never have. But I have no problem thinking it’s time for INVESTCON 5. And if you lighten up on things that appear historically expensive and switch into things that appear safer, there may be relatively little to lose from the market continuing to grind higher for a while . . . or anyway not enough to lose sleep over.

As economists speculate whether the stock market is in an AI bubble that could soon burst, OpenAI CEO Sam Altman has just admitted to believing we’re in one. “Are we in a phase where investors as a whole are overexcited about AI?” Altman said during a lengthy interview with The Verge and other reporters last night. “My opinion is yes.”

In the far-ranging interview, Altman compared the market’s reaction to AI to the dot-com bubble in the ’90s, when the value of internet startups soared before crashing down in 2000. “When bubbles happen, smart people get overexcited about a kernel of truth,” Altman said. “If you look at most of the bubbles in history, like the tech bubble, there was a real thing. Tech was really important. The internet was a really big deal. People got overexcited.”

He added that he thinks it’s “insane” that some AI startups with “three people and an idea” are receiving funding at such high valuations. “That’s not rational behavior,” Altman said. “Someone’s gonna get burned there, I think.”…

“Someone is going to lose a phenomenal amount of money. We don’t know who, and a lot of people are going to make a phenomenal amount of money,” Altman said. “My personal belief, although I may turn out to be wrong, is that, on the whole, this would be a huge net win for the economy.”

Sick as a Dog: the cheapness of US healthcare stocks, and the battle over publicly funded science research.

For three decades until 2020, US healthcare stocks generated roughly the same returns as the tech sector, and with much less volatility. Things have changed a lot since then as the tech sector has barreled ahead while healthcare has stagnated. In this special issue, we take a closer look at the many factors dragging down the healthcare sector to among the lowest relative valuations of the last 30+ years, and some possible catalysts for a rebound. To conclude, the latest in the battle over publicly funded US scientific research.

Some of the world’s wealthiest people joined Warren Buffett’s Berkshire Hathaway Inc. in buying shares of embattled insurer UnitedHealth Group Inc. in the second quarter.

George Soros’ investment firm, the family office of a Swedish packaging dynasty and Michael Platt’s BlueCrest Capital Management all increased their stakes in UnitedHealth last quarter, according to 13F filings published Thursday…

The tumult appears to have raised its appeal for resourced investors known for contrarian and value wagers, including hedge fund billionaire David Tepper, whose Appaloosa Management raised its stake by 2.3 million shares, making the insurer its second-biggest holding.

In the 1950s and ’60s, some 20% of Americans would typically move each year.

The share of people moving has steadily slowed since then, in part because the U.S. population has aged, and older people tend to move less. More Americans also live in households with two earners, which makes uprooting more challenging.

By 2019, the year before the Covid pandemic, 9.8% of Americans moved.

During Covid, there was a well-publicized increase in people decamping farther away from work and deeper into the suburbs. That surge was brief. In 2023, only 7.8% of Americans moved, the lowest rate logged since U.S. Census records began in 1948. That figure held relatively steady in 2024, the most recent data available.

The biggest drop: a roughly 47% decline among people moving within the same county over the past three decades, according to census data.

Ford Motor Co. staged an event Monday at a plant in Kentucky to unveil a new strategy for EVs, but Chief Executive Officer Jim Farley framed it as much more than that: A “Model-T moment” for the company to “change the game again,” just as its founder did more than a century ago. Standard C-suite oratory, yes, but with high stakes attached. Farley pointedly described the new strategy as “a bet” — and it’s a huge one.

Ford aims to release an all-electric mid-sized pickup truck in 2027 priced at around $30,000. That figure is not only about $10,000 cheaper than comparable, gasoline-run models sold today, but it is the same amount of money Ford lost on each of the existing EVs it sold over the past 12 months.1 This is the proverbial moonshot and then some. Achieving it requires using not just cheaper battery chemistry, but also smaller batteries altogether, since they represent the biggest cost input. What’s more, it means reengineering the entire vehicle and how it is made.

To date, efforts such as Ford’s F-150 Lightning pickup truck have been largely electrified versions of existing models. The new “universal” EV platform is designed from the ground up at a skunkworks in California and is to be built on a new “tree” assembly line format that uses large-scale casting and breaks the vehicle down into three sub-assemblies that converge at the end. The result, according to Ford, is a vehicle dispensing with three-quarters of the usual parts and 4,000 feet of wiring that is, net, 15% faster to assemble and easier on workers, with less reaching for parts and into confined spaces to attach harnesses and the like.

"Global electric vehicle sales grew by 28% year-on-year during the first half of 2025. China remained the global leader in EV sales with growth of 32%, followed by Europe with 26% and in North America with mid-single-digit growth. Due to the continued rise in Chinese exports, the rest of the world grew by 40%, having the fastest region globally led by countries like Thailand, South Korea and Brazil." — Lithium Royalty CEO Ernie Ortega

Every year since 2003, the American Time Use Survey has asked thousands of people how often they participate in certain activities on an average day, such as working, gardening, or going to parties. One category they ask about is “sports, exercise, and recreation.”

In the last two decades, the share of American adults who say they exercise or play sports on any given day has increased by about 20 percent. Year-to-year ATUS data can jitter up and down, but what’s clear is that in the last four years, Americans have been exercising at record-high levels.

Nike co-founder Phil Knight and his wife, Penny Knight, are donating $2 billion to Oregon Health & Science University’s Knight Cancer Institute—the largest known single gift to a U.S. university, coming at a time when colleges’ public funding is under siege.

The gift will roughly double the size of the cancer center, expanding its capacity to treat patients and conduct research.

The effort will be led by Dr. Brian Druker, a cancer-research pioneer known for developing Gleevec, a drug that transformed the survival of patients with chronic myeloid leukemia, a cancer of the blood and bone marrow. Druker, an OHSU professor who led the Knight Cancer Institute as chief executive officer until December, will return as the organization’s president.

“We couldn’t be more excited about the transformational potential of this work for humanity,” the Knights said in a news release Thursday…

The latest windfall to the cancer institute will change the experience for cancer patients from the moment they are diagnosed, Druker said. He said he seeks to build out the institute as a one-stop destination for all aspects of cancer treatment and testing, with an emphasis on guiding patients through what can be a scary and medically complex experience.

Part of the funds will be directed toward clinical trials and basic cancer research, he said.

Druker recalls some 25 years ago having patients who had been given a terminal diagnosis and advice to settle their affairs. He enrolled them in trials for the drug that would later be known as Gleevec. “They’re still here with me, surviving and thriving,” Druker said. “I want that for everybody with cancer, but I also want to make sure that they have compassion and care, and somebody to help them through that journey.”