This month’s data tells two stories at once. On the surface, the US economy looks unmistakably strong. Factory orders excluding transportation are at record highs, core capital goods orders surged in March, and the share of companies missing earnings estimates is the smallest in 25 years. Underneath those headlines, real personal income per capita has been flat for 15 months, the median home list price has declined for six straight years, and rents have softened for 13 consecutive months. The stock market is barely rewarding companies that beat expectations, and US dividend yields sit at record lows. For retirees and near-retirees trying to read where the economy actually stands, the gap between the indexes and the American household’s balance sheet is worth a careful look.

 

US Economy

 

Factory orders beat the consensus estimate by a full percentage point in March. Excluding transportation, orders posted another strong month-over-month gain. In level terms, factory orders excluding transportation have surged this year.

 

 

Growth in core capital goods orders rose sharply. Our economic surprise index for the US has risen, driven by better-than-expected hard data.

Real personal income per capita has not grown in 15 months and is meaningfully below the pre-pandemic trend.

The median list prices of homes were down 1.4% year over year, marking a sixth straight annual decline and signaling continued seller price adjustment in a more buyer-friendly market. Homeownership is falling across all age cohorts. According to Apartment List, US rents continue to soften, with its seasonally adjusted series having declined for 13 consecutive months.

A federal trade court struck down President Trump’s new 10% global tariffs, ruling that Section 122 of the Trade Act did not authorize the broad levies.

 

Source: @WSJ

 

The court ruling is unlikely to have a near-term impact on trade policy, as the tariffs are expected to remain in place pending appeals and may eventually be replaced under other legal authorities.

Of the 19,297 AI bills introduced, 1.4% have become law.

China’s STEM PhD graduates outnumber those of the US.

 

 

US Stock Market

 

US dividend yield is at record lows.

 

 

The long-term consensus earnings growth continues to exhibit extreme optimism. 61% of S&P 500 companies have beaten consensus EPS expectations by more than a standard deviation of estimates, above the historical average of 49%. Only 5% of companies have missed earnings estimates, the smallest share in over 25 years, outside the 2021 COVID reopening period. However, the average reward for earnings beats has been particularly small this season. The upward revision to the 2026 EPS estimate remains unprecedented relative to the typical seasonal trend.

 

Source: Morgan Stanley Research

 

Upward revisions to earnings estimates for AI infrastructure stocks have supported the overall S&P 500 EPS outlook.

 

 

Anthropic’s pre-IPO valuation has surged to $1.2 trillion.

 

 

Great Quotes

 

“The government solution to a problem is usually as bad as the problem and very often makes the problem worse.”

— Milton Friedman

 

Picture of the Week

 

Majestic mountain lake in Switzerland.

 

 

 

All content is the opinion of Brian Decker