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Steady Growth Amid Bumps in the Road

Hey everyone, it’s your friendly neighborhood analyst and wealth advisors checking-in. As we roll into the dog days of summer (or what’s left of them in 2025), Align brings you another “In Laymon’s Terms” to break down what’s been happening in the markets and economy. No crystal balls or fancy sales pitches–just our take on the headlines we’ve been contemplating. Think of this as chatting over coffee (or the water cooler).

Right now, the U.S. economy is chugging along but not without some speed bumps. The latest data shows GDP grew at a 3.0% annualized in the second quarter of 2025. That’s solid performance on the surface, but when you move the furniture across the carpet, things look a bit messy underneath. Consumer spending picked up a little bit, while business investment remained flat. Housing is still struggling. Much of this “headline growth” that we hear in the news came from quirky stuff like net exports giving the economy a boost, as inventories and other factors dragged it down. Excluding those volatile bits and government spending, private domestic demand only rose 1.5% in the first half of the year—half the pace of late 2024. To us, this suggests policy uncertainty (think tariffs and elections) might be weighing on growth. This creates risk—which is often captured as “volatility.” This is a reminder that the road to economic progress is not a straight line, but rather a winding road trip with detours (1).

Job’s Report

Speaking of jobs, July’s report was a bit of a wake-up call. Nonfarm payrolls added just 73,000 jobs—below expectations—and revisions (ahem, corrections) wiped out 258,000 that we thought we had from prior months. This was the biggest downward tweak since 1979 (outside pandemics). Unemployment crept up to 4.24%, even as the labor force shrank. Wages are still growing at 3.9% year-over-year, which is decent, but the slowdown in hiring has us wondering if the Fed might step in soon. We’re keeping an eye on this because a stable job market has been a key pillar holding the economy up (1).

On the earnings front, corporate America’s Q2 reports are looking pretty upbeat. Earnings per share are on track for year-over-year growth. Sales, margins, and (to a lesser extent) share buybacks are noted as contributing factors (1). Tech giants—the so-called “Magnificent 7” are expected to drive over half that growth, which ties into bigger trends like the AI investment surge that has many clients talking. BlackRock’s take on this is interesting: they’re seeing “mega forces” like AI as a new anchor for long-term thinking, potentially boosting economic productivity but also creating unknowns. In our view, this highlights how innovation could reshape tech-sector investing as well as the economy writ-large, but like many firms, we’re still early in figuring out the full impact (2).

Inflation continues to be another persistent issue. Once thought to be “transient” echoing 2020-2021, it’s still hanging around like a guest who won’t leave the party. July CPI showed headline inflation was up 0.2% for the month (2.7% year-over-year) and core at 0.3% (3.1%). Tariffs are starting to nudge goods prices higher—core goods accelerated to a 1.5% three-month run rate, confirming the concerns of many economists regarding the tariff economy. Add to that jumps in airfares, dental services, and used cars, and it’s clear that inflationary pressures aren’t vanishing. The Fed held rates steady at 4.25%-4.5% in July, with a couple of dissenters pushing for cuts, but Chair Powell sounded hawkish, noting inflation’s still above target (even without tariffs) and the labor market is balanced. If August jobs show more unemployment creep, a September cut could be on the table—but tariffs might prevent growth (1). BlackRock echoes this caution, pointing out how fiscal worries and mega forces could mean investors demand more from long-term bonds (2).

As far as the markets are going, U.S. stocks bounced back strong in May-July (up 14.2% for the S&P 500), one of the best such stretches since 1950, with international stocks remaining highly competitive year-to-date. Volatility’s been low lately, but risks like tariffs, election uncertainty, and slowing growth could stir things up (3). A weaker dollar has helped international growth too—it’s down in this cycle, flipping from a drag to a tailwind for overseas returns (4). And with stocks at record highs, history shows markets have often performed well after all-time highs over the last 40 years. But as always, volatility is unpredictable, and investor behavior (like buying high and selling low) can erode outcomes—studies show average investors often underperform their own funds due to timing mistakes (3).

Market Wrap Up

Wrapping this up– what am I thinking? The economy’s resilient, but tariffs and policy shifts are wildcard factors that could challenge growth while propping up inflation. Mega trends like AI offer exciting growth potential, but they come with scenarios we need to consider—BlackRock’s approach of multiple outlooks instead of one base case resonates with us as a way to stay adaptable (2). As always—remain diversified!

August Fun Fact

Here is a fun August Fact: Economists sometimes call late Summer “the panic season” because, back in the day, farmers rushing to sell harvests for cash often triggered banking shortages. Money flowed out of banks on the East coast, deep into rural Mid-Western farmlands. This money flow created a roughly 10% chance of major banking/liquidity crisis every August to October, versus just 2% in other periods! Reference: Top economist says it’s ‘panic season’ in markets and it’s your fault for taking summer vacation. Blame the ‘harvest time’ mentality | Fortune

Thanks for reading. If any of this sparks questions, reach out to your advisor— we’re always happy to chat more. Until next month, stay curious and keep aligning those retirement goals.

References:

  1. JPMorgan Economic Update, August 10, 2025.
  2. BlackRock Weekly Investment Commentary, August 11, 2025.
  3. BlackRock Student of the Market, August 2025.
  4. BlackRock USWA Market Portfolio Insights Deck, August 2025.

*This post is for informational purposes only and does not constitute investment advice. All data is as of August 20, 2025, unless otherwise noted. All indices are unmanaged, and investors cannot actually invest directly into an index. Unlike

investments, indices do not incur management fees, charges, or expenses. Past performance does not guarantee future results.

Diversification does not assure a profit or protect against loss in declining markets, and diversification cannot guarantee that any objective or goal will be achieved.