Despite the backdrop of a potential US Federal Government shutdown, the outlook for US equities remains robust, anchored by strong macroeconomic fundamentals observed prior to such events. Key economic data points highlight sustained growth, contained inflation, and resilient consumer activity, all of which paint a positive picture for risk assets. This analysis delves into the specifics of these indicators, reinforcing a bullish stance on the market and the rationale for maintaining a fully invested position.
A notable aspect supporting this optimistic view is the behavior of inflation and consumer spending. In August, the Personal Consumption Expenditures (PCE) price index recorded a modest increase of 0.3% month-over-month, translating to a 2.7% year-over-year rise. Crucially, this period also saw a healthy 0.6% increase in consumer spending. This data suggests an ideal scenario where economic growth persists without triggering an acceleration in inflation, indicating a stable and expanding economic environment conducive to market gains.
Further bolstering the case for a strong market is the revised Gross Domestic Product (GDP) figure for the second quarter of 2025, which saw an upward adjustment of 50 basis points to a robust 3.8% on a seasonally adjusted annual rate. A significant contributor to this revision was consumer spending, which was revised up by an impressive 100 basis points. Such revisions underscore the underlying strength of the economy and the powerful role of consumer demand in driving growth, providing a solid foundation for equity performance.
The labor market dynamics also present a bullish signal, despite initial appearances. As predicted in earlier assessments, a softening in the labor market has been observed. This trend is not necessarily negative; instead, it is interpreted as a positive development, suggesting that inflationary pressures from wage growth may be easing. Furthermore, the anticipated persistence of weaker hiring, even after potential rate cuts, is attributed to the increasing adoption of artificial intelligence (AI) across industries, which is expected to enhance productivity and efficiency without necessarily requiring extensive human capital.
Investor behavior further solidifies the bullish sentiment. Data indicates a significant shift in median stock holdings among younger demographics. For individuals aged 18 to 44, median stock holdings surged from $40,000 in 2019 to $118,000 in 2025. This substantial increase points to a strong \"dip-buying\" dynamic, where market downturns are viewed as opportunities for accumulation rather than reasons for divestment. This proactive investment approach among younger investors suggests an enduring confidence in the long-term prospects of the US markets.
Considering the confluence of contained inflation, robust consumer spending, upwardly revised GDP figures, a strategically softening labor market, and a strong propensity for investment among key demographic groups, the evidence strongly supports a continued bullish outlook. The underlying resilience and adaptive capacity of the US economy, even in the face of governmental fiscal uncertainties, provide a compelling argument for maintaining a fully invested position in US equities.