Financial asset prices continued their rise this month, albeit with some downside pressure at the end, as two notable AI-related companies, Nvidia and Dell, reported earnings that missed expectations, causing technology names to move lower into the month’s end. Overall for the month, the headline S&P 500 appreciated 1.91%, while the technology-heavy NASDAQ Composite index held on to a 1.58% gain. The Dow Jones Industrial Average was the leading major domestic index, rising 3.2%. In the fixed-income world, the 10-year U.S. Treasury yield slightly fell to close the month at 4.22% as participants witnessed another round of core inflation data showing further increases. At the same time, consumers demonstrated resilience in the face of significant concerns about the economy. Mixed economic data remains the overarching theme for financial markets.
The recent revision to Q2 2025 GDP data reveals that the major distortion components remained consistent, with net exports delivering a substantial +4.95% contribution, while private inventory adjustments created a -3.29% headwind. This asymmetric interplay generated a net +1.66% boost to the headline 3.3% print—a remarkable demonstration of external sector strength offsetting domestic inventory normalization. These factors represent a reversal of the impact on the Q1 2025 GDP print, where we had warned that the headline metric was misleadingly weak. We must note that the revision in real final sales to private domestic purchases, from +1.2% to +1.9% is encouraging, as this metric strips away volatile inventory effects to reveal the actual underlying demand dynamics. This upward revision suggests that the domestic consumption foundation exhibits greater resilience than initially captured; however, this is now in the past, and the stock market looks to the future.
On the other hand, and in a more cautious light, Personal Consumption Expenditures registered a modest +0.2% upward revision to 1.6%—an improvement over Q1’s anemic +0.5% but still at multi-quarter lows not seen since Q2 2023. The goods sector delivered a strong performance at +2.4%, representing a substantial rebound from Q1’s marginal +0.1% advance. The services growth of +1.2% represents a recovery from Q1’s disappointing +0.6%, yet we consider these growth rates deeply concerning for a services-dominated economy. The current trajectory marks the weakest services performance since the Trump 1.0 administration, with only Q2 2023’s +1.6% registering below the critical 2% threshold. We believe this services sector deceleration reflects substantial structural challenges. Annual services growth has compressed dramatically from 2022’s inflation peak of +5.0% to a normalized 2.9% in both 2023 and 2024—a remarkable normalization that may have overcorrected, given current sub-2% quarterly readings.
Overall, the significant external sector contribution from global trade imbalances, created by American businesses attempting to front-run tariffs, masks the underlying fragility of domestic demand, which requires continued monetary accommodation to achieve sustainable growth momentum. The current GDP composition suggests a case for cautious optimism. However, our case considers the services sector weakness as a substantial risk factor that could constrain broader economic expansion if persistent structural headwinds remain unaddressed.
Looking at the American household, consumer confidence took a notable dip in August, with the Conference Board’s and University of Michigan’s surveys showing continued weakness, reflecting growing concerns about the job market following significant downward revisions to employment data. Americans are becoming increasingly selective about their discretionary spending, though they remain responsive to discounts and value-driven offers as inflation pressures continue to impact household budgets. According to the Conference Board survey, the labor market outlook has darkened considerably, with fewer people viewing jobs as plentiful (down to 29.7%) and more expecting job availability to decline in the coming months (up to 26.8%). At the same time, inflation expectations have resumed their upward trajectory after three months of easing, with consumers expressing particular concern about rising prices for essentials like food and groceries, as well as potential tariff impacts. Looking ahead, Bloomberg economists expect this cautious consumer behavior to persist through the second half of 2025, particularly affecting lower- and middle-income households who are feeling the strain most acutely. Despite some positive sentiment around recent congressional budget legislation, the overall economic uncertainty suggests that soft consumer spending patterns will likely continue into the latter part of the year.
Please see the following updates on existing positions held at the firm:
Dominion Energy (Ticker: D)— The utility company reported a successful second quarter, exceeding both revenue and earnings expectations. On the day of the earnings announcement, the stock rose over 3%. Management expressed a focused and confident outlook, citing data center expansion and economic growth as key drivers. They noted record-high peak energy usage in Virginia and South Carolina. The guidance for 2025 earnings per share (EPS) remains unchanged, projected to be between $3.28 and $3.52, with a midpoint of $3.40. Management highlighted continued progress and de-risking of the Coastal Virginia Offshore Wind (CVOW) project, which is now between 55% and 60% complete. Leadership emphasized robust sales growth driven by demand from data centers. We continue to see good relative value in Dominion Energy and plan to hold our investment for the foreseeable future.
Enbridge, Inc. (Ticker: ENB)- Enbridge reported record EBITDA for the second quarter, significantly boosted by contributions from acquisitions of U.S. gas utilities and successful rate settlements. Adjusted EBITDA rose by 7%, while earnings per share increased by 12% compared to the same quarter in 2024. Management expressed greater confidence in reaching the upper end of the 2025 EBITDA guidance range, indicating a more optimistic outlook than the reaffirmation of guidance provided last quarter. This positive sentiment stems from the company’s strong project execution and a growing backlog driven by demand in data centers and AI.
Public Service Enterprise Group (Ticker: PEG)— PEG reported a strong second quarter 2025, while maintaining confidence in delivering full-year 2025 non-GAAP Operating Earnings guidance of $3.94 to $4.06 per share, representing a 9% increase at the midpoint over 2024 results. PSEG experienced significant growth in extensive load inquiries, reaching over 9,400 megawatts by June 30, 2025, up from 6,400 MW at the end of March, driven primarily by existing and prospective data center customers. PSEG Power’s nuclear operations demonstrated improved performance, generating approximately 7.5 terawatt-hours of energy during the second quarter, a 0.5 terawatt-hour increase over the same period in 2024. Recent regulatory developments included PJM’s capacity auction results, which priced capacity at $329 per MW-day for 2026/2027. PSEG Nuclear cleared approximately 3,500 MW of eligible nuclear capacity, while federal tax legislation preserved nuclear production tax credit benefits.
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Stash J. Graham