For some clients enjoying fall’s arrival—crisp air, changing leaves, and pumpkin-spiced everything—Arizona remains sizzling. We’re still enduring triple-digit heat and a recent monsoon storm that toppled trees across the Valley.

It’s a good reminder: just like the start of autumn varies by region, today’s economy presents a mix of clear skies and surprise storms—some signs of strength, some of softness, and others that remain unsettled.

Here’s what we’re tracking now, and what it means for your financial plan.

The Fed Eyes 2026 Rate Cuts

The Federal Reserve held rates steady again this month. Markets are now parsing whether this pause signals patience—or a move toward easing. Analysts at J.P. Morgan see as many as four rate cuts by early 2026, which could lower the federal funds rate to approximately 3.25%–3.50% .

Remember: rate reductions typically follow economic softening, not strength. We’ll be watching how data—actual and unexpected—shapes Fed decisions.

Q2 GDP Rebounds More Than Expected

Breaking news: The U.S. economy grew at an annualized rate of 3.3% in Q2, revised up from the initial 3.0% estimate—despite a 0.5% contraction in Q1 . This rebound reflects stronger-than-anticipated consumer spending and private-sector investment, alongside a sharp 29.8% decline in imports, which mechanically boosts GDP .

Corporate profits also roared back, rising by $65.5 billion in Q2 after a decline in Q1 .

Still, many economists caution that the import-driven lift may not reflect sustainable underlying momentum .

Leading Indicators Signal Softer Momentum

Meanwhile, the Leading Economic Index (LEI) dropped again in July, down 0.1%, marking a 2.7% decline over the past six months. While headline growth jumped in Q2, this softer LEI suggests that forward momentum may still be running out of steam .

If the LEI’s decline continues, it strengthens the case for Fed rate cuts next year, giving policymakers cover to ease conditions in response to weakening trends. Tariffs:

A Mixed Bag Tariffs remain a debated factor in the outlook.

For some industries, they provide protection and encourage domestic production. For others, they raise input costs and inject uncertainty into supply chains.

Both effects are real—and they coexist. The Conference Board estimates U.S. GDP growth will slow from 1.6% in 2025 to 1.3% in 2026, with tariffs contributing to that moderation .

Much like an unexpected Arizona downpour, tariffs can be beneficial in one place and disruptive in another.

Markets Remain Strong—but Valuations Are Elevated

Despite the mixed signals, equity markets have stayed buoyant. J.P. Morgan’s models suggest the S&P 500 is about 15% above fair value, indicating strong expectations already baked into prices .

Yet capital continues to flow into markets. Analysts forecast over $500 billion in equity inflows during H2 2025, driven primarily by retail and foreign investors . That liquidity has helped keep stocks resilient, even as fundamentals suggest caution.

This is the classic tension we watch closely: strong inflows versus stretched valuations.

What Does This Mean for You?

At Strategic Income Group, we believe true clarity doesn’t come from predicting every headline, but from staying rooted in your plan. Still, here are a few ways today’s environment might connect to your personal strategy:

Elevated valuations may be a good signal to explore strategic rebalancing across portfolios—realigning risk and opportunity while markets remain strong.

For those at RMD age, consider whether now makes sense to take your Required Minimum Distribution (RMD) while portfolio values are high.

Weakening leading indicators suggest rate cuts may be on the horizon in 2026. For clients with borrowing needs or upcoming liquidity events, that could present opportunities down the road.

Unless your life circumstances—income, goals, or timeline—have changed, there may be no immediate action needed. But if you’re wondering whether it’s time to rebalance, adjust, or capture current market strength, we’re here to talk it through.

Looking Ahead

We’ll continue to monitor:

• The Fed’s signals toward potential 2026 rate cuts
• Trends in the Leading Economic Index (LEI)
• How tariffs unfold—industry by industry
• Market valuations balanced against capital inflows

Just as Arizona’s fall diverges from others, today’s economy sends different signals depending on perspective. The real reassurance comes from knowing your plan is built to stay grounded, even when the data feels stormy.

References:

• US economy grows 3.3% in Q2 2025, beating forecasts – IndiaTimes (Aug. 28, 2025).
• US corporate profits rebound in second quarter; GDP growth revised higher – Reuters (Aug. 28, 2025). Link

Compliance Disclosures:

The information contained herein is for informational and educational purposes only and should not be construed as investment, tax, or legal advice. The views expressed are based on current economic and market conditions as of the date indicated and are subject to change without notice. Past performance is no guarantee of future results.

Strategic Income Group is an SEC-registered investment adviser. Registration does not imply a certain level of skill or training. For more information about our firm, including our services and fees, please refer to our Form ADV, which is available upon request or at www.adviserinfo.sec.gov