Only 9.5% of senior loan officers report tightening standards, far below the 50%-60% typical recession levels.
More than half of the NYSE companies are trading above their 200-day moving averages, just above the long-term norm.
These are less about pinpoint precision and more about capturing the overall direction of the economy and labor market.
Why do people keep asking me whether I think 100 unarmed humans could defeat a fully grown silverback gorilla in a fight to the death? I have so many follow-up questions. First: Do I get to choose the other 99 humans? Second: Are there any rules, or is this an old-school World Wrestling Federation no-holds-barred scenario? Third: Why would I want to provoke a typically calm and gentle animal?
I’m not sure where the social media consensus has landed, but personally, I’d rather not test an animal that can lift more than 1,800 pounds and bite with a force of 1,300 PSI. Yes, gorillas rarely use their strength aggressively, but I’d prefer to keep it that way.
It’s analogous to asking whether the $30 trillion US gorilla of an economy1 can withstand policymakers armed with tariffs, “too-late” monetary policy, regressive fiscal bills, and “rigged” job numbers, to name a few. Personally, I would have preferred we left the docile early-2025 US economy alone. Growth was resilient.2 Inflation was stable.3 Let sleeping giants lie, as they say.
Instead, the contest has begun. The debate is viral.
And once again, I’m going with the gorilla.
… the usual “canaries in the coal mine” for the US economy aren’t flapping, wheezing, or falling off their perch. (Apologies for the back-to-back animal metaphors.) A look at bank lending standards and credit spreads reveals little cause for alarm. Only 9.5% of senior loan officers report tightening standards, far below the 50%-60% levels typically seen during recessions.4 Meanwhile, high yield credit spreads are trading roughly 200 basis points below their long-term average,5 which suggests investors are confident enough in the economy to continue to lend money to businesses with below-investment grade ratings.
In short, the canaries are still singing.
A: That’s so 2024! Last year, the so-called Magnificent 7 soared 67.34%, while the other 493 companies in the S&P 500 managed just 13.59%.6 It was a narrow rally, no doubt.
This year, the story’s different. The other 493 were outpacing the Magnificent 7 for much of the year and remained neck-and-neck through July 31.7 What’s more, more than half of the companies listed on the NYSE are trading above their 200-day moving averages, slightly above the long-term norm.8
It’s not the broadest advance we’ve ever seen, but it’s a far cry from last year’s top heavy market.
A: That’s correct, they’ve been largely sitting out the rally. As of mid-August, the S&P Small Cap 600 Index has returned just 0.04% year-to-date.9 Perhaps small caps will outperform when there’s a catalyst such as easier monetary policy and/or accelerating economic growth. So far, neither has materialized in 2025, but may be forthcoming.
A: Every cycle, I find myself obsessively focused on a different indicator. In 2008 it was the interbank lending spread. In 2020, it was social mobility metrics, followed by back-to-work barometers, like the number of employees swiping security cards to enter office buildings. This time, it’s the 3-year US Treasury inflation breakeven, which reflects the bond market’s expectation for inflation over the next three years. Since early May 2025, it has averaged 2.50%.10 That’s price stability, at least where I come from, and it suggests the Federal Reserve (Fed) has room to lower interest rates. If the breakeven were to meaningfully break above that average, I’d be more concerned about the cycle.
"Until it is corrected, the BLS (Bureau of Labor Statistics) should suspend issuing the monthly job reports but keep publishing the more accurate, though less timely, quarterly data."
— E.J. Antoni, Trump’s nominee to lead the BLS
That may not fly. The BLS is legally required to publish employment statistics at least once each month. This requirement is codified in 29 U.S. Code § 2, which states:
“The Bureau of Labor Statistics shall also collect, collate, report, and publish at least once each month full and complete statistics of the volume of and changes in employment, as indicated by the number of persons employed, the total wages paid, and the total hours of employment…”
As for me, I’ll be watching the ADP National Employment Report more closely than I had in the past. It’s true that the BLS report offers a broader view of employment, because it includes government hiring. ADP focuses solely on the private sector. Still, the rolling six-month correlation between the two is remarkably strong.11 The reality is that these indicators are less about pinpoint precision and more about capturing the overall direction of the economy and the labor market. What matters most is choosing an indicator that resonates with you and sticking with it. The challenge arises when investors jump between data sets in search of confirmation for preexisting biases.
The US dollar has declined by 9.5% this year against a basket of its largest trading partners.12 The currency had been relatively range bound for much of the summer but is likely to continue to moderate given its lofty valuation13 and the likelihood that the growth and interest rate differential between the US and the rest of the world will narrow.
Among the best-performing asset classes during periods of US dollar decline are — not surprisingly — emerging market and developed market stocks as well as commodities and non-US bonds.14
Source: Bloomberg L.P., Aug. 8, 2025, based on quarterly returns from Q1 1974–Q2 2025 for the dollar, S&P 500 Index, MSCI Emerging Market (EM) Index, MSCI EAFE Index, gold, and the Bloomberg Commodity Index. Based on quarterly returns from Q2 1990–Q2 2025 for the Bloomberg Global Aggregate ex-USD Index (global bonds ex-US) and from Q2 1976–Q2 2025 for the Bloomberg US Aggregate Index (US bonds). US dollar performance is based on the Real Broad Trade Weighted US Dollar Index. All return figures are in US dollars. An investment cannot be made directly into an index. Past performance does not guarantee future results.
I reached out to Justin Livengood, Senior Portfolio Manager of Invesco’s Mid Cap Growth strategy, to assess his view of the recent pickup in initial public offerings (IPOs). Here are a couple of highlights from his response:
Candidly, I was excited listening to Justin’s enthusiasm over the “flurry of activity.” Listen to my full conversation with him on the Greater Possibilities podcast.
Mercifully, the world tour tends to slow down in the summer. I just hope the coffee baristas at Newark Airport don’t miss me too much. It’s time again for my annual Grateful Dead lyric: “Summertime done come and gone, my, oh, my.” I love quoting the Dead. I hate saying goodbye to summer.
While the national debt keeps growing, it may still be manageable in the short term despite the investment risk or pending disaster some investors fear.
Get insight on the importance of Fed independence, tariff-impacted prices, and which industries could lead or lag under the One Big Beautiful Bill.
The S&P 500 Index recently hit another record high. But stock market highs don’t tell long-term investors all that much.
Get the latest information and insights from our portfolio managers, market strategists, and investment experts.
Important information
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All investing involves risk, including the risk of loss.
Past performance does not guarantee future results.
Investments cannot be made directly in an index.
This does not constitute a recommendation of any investment strategy or product for a particular investor. Investors should consult a financial professional before making any investment decisions.
The ADP National Employment Report measures nonfarm private payrolls. It is published monthly in collaboration with Moody’s Analytics.
A basis point is one-hundredth of a percentage point.
The Bloomberg Commodity Index is a broadly diversified commodity price index.
The Bloomberg Global Aggregate ex USD Index is a measure of investment grade debt from 24 local currency markets and includes treasury, government-related, corporate and securitized fixed-rate bonds from both developed and emerging markets issuers. Bonds issued in USD are excluded.
The Bloomberg US Aggregate Bond Index is an unmanaged index considered representative of the US investment grade, fixed-rate bond market.
The Bloomberg US Corporate High Yield Bond Index measures the US dollar-denominated, high yield, fixed-rate corporate bond market. Securities are classified as high yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB+/BB+ or below.
Breakeven inflation is the difference in yield between a nominal Treasury security and a Treasury Inflation-Protected Security of the same maturity.
Commodities may subject an investor to greater volatility than traditional securities such as stocks and bonds and can fluctuate significantly based on weather, political, tax, and other regulatory and market developments.
The Consumer Price Index (CPI) measures the change in consumer prices and is a commonly cited measure of inflation.
Correlation is the degree to which two investments have historically moved in relation to each other.
A credit rating is an assessment provided by a nationally recognized statistical rating organization (NRSRO) of the creditworthiness of an issuer with respect to debt obligations, including specific securities, money market instruments, or other debts.
Credit spread is the difference in yield between bonds of similar maturity but with different credit quality.
Monetary easing refers to the lowering of interest rates and deposit ratios by central banks.
The profitability of businesses in the financial services sector depends on the availability and cost of money and may fluctuate significantly in response to changes in government regulation, interest rates and general economic conditions. These businesses often operate with substantial financial leverage.
Fluctuations in the price of gold and precious metals may affect the profitability of companies in the gold and precious metals sector. Changes in the political or economic conditions of countries where companies in the gold and precious metals sector are located may have a direct effect on the price of gold and precious metals.
Gross domestic product (GDP) is a broad indicator of a region’s economic activity, measuring the monetary value of all the finished goods and services produced in that region over a specified period of time.
High yield bonds, or junk bonds, involve a greater risk of default or price changes due to changes in the issuer’s credit quality. The values of junk bonds fluctuate more than those of high quality bonds and can decline significantly over short time periods.
Inflation is the rate at which the general price level for goods and services is increasing.
Interest rate risk refers to the risk that bond prices generally fall as interest rates rise and vice versa.
The Magnificent 7 stocks refer to Amazon, Apple, Alphabet, Meta, Microsoft, Nvidia, and Tesla.
The MSCI EAFE Index is an unmanaged index designed to represent the performance of large- and mid-cap securities across developed markets, including countries in Europe, Australasia, and the Far East, and excluding the US and Canada.
The MSCI Emerging Markets Index captures large- and mid-cap representation in emerging market (EM) countries.
Nominal Gross Domestic Product (GDP) is the market value of all final goods and services produced in a geographical region, usually a country.
The Real Broad Trade-Weighted US Dollar Index measures the value of the US dollar against a trade-weighted basket of foreign currencies, adjusted for inflation.
PSI is pounds per square inch.
Option-adjusted spread (OAS) is the yield spread that must be added to a benchmark yield curve to discount a security’s payments to match its market price, using a dynamic pricing model that accounts for embedded options.
The S&P 500® Index is an unmanaged index considered representative of the US stock market.
The S&P 600 SmallCap Index measures the performance of small-capitalization stocks in the US.
Stocks of small- and mid-sized companies tend to be more vulnerable to adverse developments, may be more volatile, and may be illiquid or restricted as to resale.
Spread represents the difference between two values or asset returns.
Standard deviation measures a portfolio’s or index’s range of total returns in comparison to the mean.
Tightening monetary policy includes actions by a central bank to curb inflation.
Treasury Inflation-Protected Securities (TIPS) are US Treasury securities that are indexed to inflation.
The US Dollar Index measures the value of the US dollar relative to the majority of its most significant trading partners.
Fixed income investments are subject to credit risk of the issuer and the effects of changing interest rates. Interest rate risk refers to the risk that bond prices generally fall as interest rates rise and vice versa. An issuer may be unable to meet interest and/or principal payments, thereby causing its instruments to decrease in value and lowering the issuer’s credit rating.
The risks of investing in securities of foreign issuers, including emerging market issuers, can include fluctuations in foreign currencies, political and economic instability, and foreign taxation issues.
In general, stock values fluctuate, sometimes widely, in response to activities specific to the company as well as general market, economic and political conditions.
The opinions referenced above are those of the author as of Aug. 22, 2025. These comments should not be construed as recommendations, but as an illustration of broader themes. Forward-looking statements are not guarantees of future results. They involve risks, uncertainties, and assumptions; there can be no assurance that actual results will not differ materially from expectations.
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