From the T&Q Desk
U.S. equities extended their record-setting run Tuesday after July CPI showed only muted tariff pass-through, easing fears of a sustained inflation flare-up. Headline prices rose in line with expectations. Markets saw this as clearing the way for the Fed to resume rate cuts; futures now price a 90%+ chance of a 25 bp September cut and at least one more by year-end.
Small caps stole the show, with the Russell 2000 up nearly 3% versus ~1% gains for the S&P 500 and Nasdaq, pushing both indices to all time high closes. Bond markets were calm and the dollar softened 0.5%. Sector breadth was strong, led by Communications, Technology, and Materials, while Utilities and Real Estate lagged. Gold ended flat, crude slid over 1% despite OPEC’s steady demand outlook, and corn futures collapsed to contract lows on record U.S. crop projections.
The T&Q Index has added another 4% this week, with Astera Labs (ALAB) 7% day yesterday helping to push the returns since inception near 28%
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Word Around the Street
CPI relief didn’t just lift stocks, it buoyed sentiment. Analysts are upgrading 2025 S&P 500 EPS forecasts after a stronger-than-expected Q2 season, reversing the past three quarters’ trend of downward revisions. AI spending is now the single largest contributor to U.S. GDP growth, surpassing consumer spending, per Ryan Detrick.
AI Is The Real Reason Why the U.S. Economy Isn’t in Recession
AI spending, driven by Big Tech (primarily by $MSFT, $META, $AMZN, $GOOGL), has overtaken consumers as the biggest boost to U.S. GDP.
Without it, growth would be near zero.
In this short video, @sonusvarghese and I
— #Ryan Detrick, CMT (#@RyanDetrick)
1:09 AM • Aug 12, 2025
On the consumer front, debt stress is building: credit card delinquencies over 90 days hit 12.3%, near decade highs, and serious delinquencies on auto and student loans are climbing sharply.
Housing supply remains highly uneven. For example, Connecticut’s active listings are down 73% from pre-pandemic levels, while Texas, Florida, and Tennessee have seen the largest inventory growth. Eight states now have more listings than before COVID.
Trade Winds
Nerves are high ahead of the Trump-Putin summit, with European allies bracing for potential U.S.-Russia deals that could unsettle NATO unity. In Asia, China’s economic “squeeze” strategy, restricting exports of critical inputs and leaning on global supply chains, is intensifying just as the U.S. renews focus on trade barriers. Meanwhile, Beijing’s lead in open-source AI is catching Washington off guard, forcing tech leaders and policymakers to reassess the competitive balance in AI innovation.
D.C. in the Driver’s Seat
The White House is pressing its narrative that July’s inflation data vindicates its trade stance, even as economists warn tariff effects may still build. Debate over the Bureau of Labor Statistics intensified after the Trump administration’s appointment of EJ Antoni, sparking discussion over data independence. Budget numbers added fuel to the fiscal fire, July’s deficit jumped 19% y/y to $291B, with tariff receipts up but outlays hitting a monthly record. Expect fiscal sustainability to remain a live campaign issue.
Economic Data
MBA 30 Year Mortgage Rate
Fed Speeches: Barkin, Goolsbee, Bostic
Earnings Reports
CSCO
Overnight Markets
Asia: Nikkei 1.30%, Shanghai 0.48%
Europe: FTSE 0.05%, DAX 0.75%
U.S. Pre-Market:
Final Thoughts
Markets are leaning into the “soft landing plus Fed cuts” narrative, but the setup is fragile. Tariff pass-through may lag, debt stress is rising, and geopolitical risks could quickly alter the Fed’s path. For now, traders are happy to ride the tailwinds, but the backdrop suggests nimbleness, not complacency, will be rewarded.