Monday, July 14th, 2025
It’s easy to get caught up in scary headlines about debt, sluggish job growth, and political uncertainty. But when you step back and look at the bigger picture, the underlying US and global economy is in solid shape and that’s good news for your investments.
In recent months there have been a few mixed signals from the US jobs report. Job creation in June came in at 147,000, and the unemployment rate ticked down to 4.1%, good news, but some commentators noted that the growth came mainly from government and healthcare jobs, not from cyclical industries like manufacturing or hospitality.
So, is that a red flag?
Not really. Job growth is still positive, and it’s happening at a pace consistent with a stable, mature economy. Cyclical industries like construction, transportation, and hospitality are softening but not shrinking, more of a cooling than a crisis.
Long-term trends remain intact: low layoffs, low quits, and still-decent corporate profits.
This, in short, mean no imminent recession, just a steadying after a period of overheating. That’s what you want when inflation has been a concern. And the Fed may be done raising interest rates, with some cuts possibly coming this year, a further tailwind for stocks.
Meanwhile, it is becoming increasingly clear that the AI productivity boom is only just getting started.
Major companies across sectors, from banks to logistics to healthcare, are starting to deploy AI tools that make them more efficient. Goldman Sachs estimates that AI could boost global GDP by over $7 trillion over the next decade, thanks to productivity gains.
Microsoft and Nvidia continue to show blockbuster earnings driven by enterprise demand for AI infrastructure.
The most exciting thing for us as investors is that most of these AI gains haven’t fully materialised yet. We’re in the early innings. As companies get leaner and more capable using AI, profit margins may improve even if revenue stays flat, great news for stockholders.
In addition to a stable economy and AI productivity upside, we have another new catalyst to be excited about. After years of budget restraint, Germany is back in stimulus mode.
The government is increasing spending on infrastructure (including green energy and digital transformation), defence (following the Ukraine crisis), and industrial subsidies to re-shore key industries
This isn’t just good news for Germany, it’s a boost for the European economy, and even for global trade. When the world’s fourth-largest economy opens the taps, liquidity and demand ripple outward.
We would like to thank Dominion Capital Strategies for writing this content and sharing it with us.
Sources: Bloomberg, Yahoo Finance, Marketwatch, MSCI.
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