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Core Strategy gained 2.87% in August, beating the S&P 500 with net equity exposure under 60% (9.30% YTD). Select Industries jumped 4.11% (19.90% YTD) on Gold Miners and AI-displacement holdings. Grizzly slipped 1.93% in a tough short environment but stayed just 8.13% down YTD.

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Job growth has gone soft, yet unemployment has barely budged. Fewer jobs, but nobody’s catching the boot. In past years, low job growth would’ve sounded economic alarms. Today, it’s closer to noise. The reason for that change is worth understanding, so we developed a better metric: the Employment Diffusion Index.

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From the end of May through August, the S&P 500 advanced 1.4%, not much to write home about. Yet, wild swings in semiconductor and momentum stocks, serious wobbles at the top of the capitalization structure, and a washout and then recovery in the software space, packed those months with excitement.

After a huge win in July, our Mega-Cap Value proxy continued to outperform Growth in August. Over the last two months: Royal Blue Value +9%; RB Growth -12%.

This matches last month’s “narrowest” reading of the past year. Our Ratio of Ratio’s small-cap discount hasn’t been above today’s level in five years. On top of that, this vignette hasn’t been at its long-term average (Small Cap/Large Cap P/E parity) in eight years.

Q2 estimated bottom-up operating EPS continue to skyrocket as reporting winds down. The current figure of $100 stands at a mind-boggling 23% above the final “pre-reporting” estimate logged at the end of June. YOY EPS growth is now nearing an amazing 50%.

Our rankings for groups associated with the AI trade have been declining, while those viewed as vulnerable to AI are improving. Outside of that theme, a notable deterioration has occurred in housing-related industries; the Homebuilding group fell to Unattractive for the first time since February 2014.

Our Risk Aversion Index (RAI) fell and triggered a new “Lower-Risk” signal, which closed out the “Higher-Risk” message generated at the end of March.

Despite a long list of worries, the economy is healthy and the risk of an imminent recession is low. Market-based measures are favorable, and the war-driven confidence shock has largely dissipated.

The latest data proposes that the acute phase of the early 2026 private-credit contagion has been restrained so far, but the stress is still real. While FSK showcases how a credit cycle can be properly managed, the 777 failure is a sobering reminder of the systemic vulnerabilities deeply embedded in this space.

Today’s spiking Courage/Fear Ratio reflects optimism borne of an extended market run and AI mania. Yet, history tells us that the path forward is likely to test the mettle of levered bulls, and a full tilt toward Courage at present may be straddling the line between bravery and foolishness.

Consumer sentiment has hit a recent low, yet cyclical stocks are trading at relative highs. Investors have not yet begun to position for a bearish or recessionary environment.

S&P 500 earnings, excluding Financials and Real Estate, grew 66% year-over-year, a result that wouldn’t be surprising coming out of a deep recession, but is almost incomprehensible in the middle of an economic expansion.

Despite the S&P 500's solid advance in August, the downside estimates were virtually unchanged month-over-month, as robust growth in both earnings and cash flow continues.

Today’s combo of high equity valuations, high bond yields, and negative correlation is a fragile configuration: It removes the portfolio-level shock absorber while raising the sensitivity of equity valuations to the rate path. PMs should be alert to the correlation regime as they set risk budgets and asset weights.

S&P 500 Q2 estimated bottom-up operating EPS continues to move higher as reporting comes to a close. The current figure of $100 stands at a mind-boggling 23% above the final “pre-reporting” estimate logged at the end of June. The resulting vertical line on our Q2 snail trail seems almost laughable. YOY EPS Growth is now nearing an amazing 50%. This feat is even more impressive given the fact that the look-back comparison was not a severe downturn. In fact, Q2-25 was a strong earnings quarter (+11% YOY).

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