Where We Stand Economically

As we enter the final quarter of 2025, let's take stock of where things stand economically with some facts below to ponder:

The equity markets closed at, or close to record high's. The DOW reached a record high yesterday at 46,397. Some are concerned about some irrational exuberance, especially the extreme investment in A.I, while some believe we're at the start of a super-cycle in the economy.
Second quarter GDP grew 3.8%, its fastest growth pace in nearly 2 years. Much of this growth stems from A.I. investment and is highly concentrated.
Corporate earnings are on track to rise 12% from last year, the third straight quarter of double-digit growth fueled by higher prices and lower operating costs and reduced staffing.
The unemployment rate reached 4.3% in August, well below historical recession thresholds. But it's expected to reach around 4.5% by the end of the year. A.I. appears to be reducing some labor needs. Reduced labor is helping drive corporate profits combined with rising prices.
Inflation remains sticky around 3%. The hope is that the shock of tariff costs fueling inflation is a one-time hike in prices.
Tariffs on imported goods are averaging around 18%, the highest levels since the 1930's.
Retail sales rose last month, however the top wealthiest 10% of Americans now account for a record 50% of all consumer spending. This is extreme concentration.
The top 10 U.S. stocks are worth more than China’s entire stock market and have accounted for 55% of the index’s gain since 2021.
Concentrated gains among a few households and stocks can make the economy look stronger than it is. This misalignment can lead policymakers, investors, and business leaders to make decisions based on aggregate numbers that don’t reflect underlying reality.
By many metrics, middle and low-income households are struggling.
Sales of very cheap food items have risen significantly since the beginning of 2025.
Searches for “cheap eats” are up 21% compared with 2024.
The gold price is rapidly approaching $4,000. A barometer for high inflation, economic uncertainty, geopolitical instability, and low real interest rates, signaling investor fear and a search for safe-haven assets to preserve wealth and hedge against systemic risk.
FHA mortgages, typically used by first-time buyers or lower-income individuals, now account for nearly 40% of delinquencies, despite making up just 12% of mortgage balances, up from 30% before the pandemic.
The FED has started lowering rates: The median FOMC projection suggests two more 25-basis-point cuts before the end of 2025, which would bring the federal funds rate to 3.50%–3.75%. Lower financing costs on cars and credit cards could help place more capital in the hands of consumers and improve affordability, possibly the biggest issue of 2025.
The 10-Year Treasury remains above, far below the 4.8% high of earlier in 2025. This drives the mortgage markets.

I will not provide any predictions today, taking cues from almost every single economist who always peppers their predictions with "but it all depends". Only time will tell how this all unfolds over the next few months and years.

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