Labor Market Resilience

Recent updates on inflation highlight important trends for consumers. While headline inflation remained relatively tame in July, the Producer Price Index (PPI) told a different story. The PPI for final demand, which measures average price changes received by domestic producers, showed that companies are increasingly passing cost increases along to consumers. Despite these pressures, retail sales data indicates that consumers remain willing to spend. This resilience is largely supported by the labor market, which continues to show strength. Although hiring has slowed, layoffs remain minimal. Importantly, CEO hiring forecasts have improved since April, when tariff concerns spooked employers. At that time, 39% of CEOs planned to reduce hiring; today, that number has dropped to just 21%. This matters greatly, as consumer spending fuels corporate earnings, and earnings, in turn, drive stock prices. For now, the stability of the labor market is proving strong enough to offset rising inflationary pressures.

Strong Earnings Despite Tariff Pressures

Second-quarter earnings, covering April through June, provide another encouraging signal. During a period filled with uncertainty around tariffs and higher input costs, many expected corporate America to struggle. Instead, the opposite occurred. Earnings expectations for the S&P 500 initially fell to $62.48 but rebounded sharply to $66.84 as companies reported results. To date, 80% of companies have reported, and nine of eleven sectors have exceeded expectations. On a year-over-year basis, earnings grew nearly 13%, a significant achievement given the challenges. This outcome demonstrates the adaptability of U.S. corporations. Many feared tariffs would serve as an excuse for disappointing results, yet companies were able to pivot and deliver stronger-than-expected performance. This innovation not only supports earnings today but also signals potential for continued growth. Since stock valuations are tied to earnings, strong earnings growth helps justify higher market levels. What some call an “expensive” market may quickly look reasonable if earnings continue to expand at current rates.

Fed Policy and Rate Cut Expectations

The Federal Reserve remains in focus as markets await updates from its Jackson Hole conference. At its last meeting, the Fed opted to keep rates steady, though two members dissented in favor of a rate cut. Attention now turns to whether cuts are imminent. Markets are currently pricing in about an 85% chance of a rate cut in September, down from nearly 98% after hotter than expected PPI data. The Fed has pointed to tariffs as a key driver of inflation, though this explanation remains debated. Beyond policy decisions, the composition of the Fed itself could soon change. President Trump is expected to nominate Stephen Miran to fill a vacant seat. While this would initially be a temporary role, Miran could later become a permanent member, depending on Chairman Jay Powell’s tenure. Future leadership possibilities include Kevin Warsh, Christopher Waller, or Kevin Hassett, underscoring the many moving parts in Fed decision-making.

Greg Powell, CIMA®

President and CEO

Wealth Consultant

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Bobby Norman, CFP®, AIF®, CEPA®

Managing Director

Wealth Consultant

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Trey Booth, CFA®, AIF®

Chief Investment Officer

Wealth Consultant

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Ty Miller, AIF®

Vice President

Wealth Consultant

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Fi Plan Partners is an independent investment firm in Birmingham, AL, with a team of professionals serving clients across the nation through financial planning, wealth management and business consulting. The team at Fi Plan Partners creates strategies in the best interest of their clients using fee based investing.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

Economic forecasts set forth in this presentation may not develop as predicted.

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