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Positive signals from capex?

September 1, 2025

Time to Read: 3 mins

The One Big Beautiful Bill Act’s provision regarding the full expensing of capital expenditures is already having an impact on companies’ investment plans. We believe this a positive signal for economic growth.

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This past Independence Day, President Trump signed the long-awaited One Big Beautiful Bill Act into law. Along with the tax and spending cuts included in the Act are notable pro-growth policies, such as the full expensing of capital expenditures (capex) for businesses. Additionally, under the Act, companies can write off qualifying research and development expenditures in the year they are incurred.

In anticipation of these provisions, manufacturers have begun to increase their capex plans, which we view as a positive signal for future economic growth. Continued reshoring and the growing need for data center power are driving increased capex in the Industrials, Energy and Materials sectors. Additionally, the new tax incentives and proliferation of artificial intelligence adoption are leading to new investment in semiconductors and supply chains,

We expect the Act’s business-friendly clauses to stimulate investment and boost productivity. Historically, rising capex has aligned with stronger growth.

Chart of the Week | Macroeconomic

Not in a bubble

As the S&P 500 approaches all-time highs, there are renewed concerns among investors about elevated valuations. However, historically strong profitability and expected earnings growth appear to support current pricing. In addition, the current S&P 500 price-to-earnings (P/E) ratio is roughly equal to the average since Covid. As a result, we do not view U.S. equities as being in bubble territory and we remain constructive on the asset class.

Chart of the Week | Macroeconomic

Is the market rally broadening?

Stocks, as measured by the S&P 500, are up over 13% through early August. The solid gains have been fueled by a resilient economy, steady consumer spending, optimism around artificial intelligence and better-than-expected earnings growth. Still, some investors worry the advance may be too concentrated in technology and that AI-capex monetization may fall short of expectations. A closer look suggests that it is not just tech moving the market higher.

Chart of the Week | Macroeconomic

Fed friction?

Markets are navigating tensions between a Fed that offers less guidance and an inflation backdrop that remains sticky. Added uncertainty from Middle East tensions and energy-price swings is further shaping sentiment, with recent moves in Treasury yields suggesting the market wants the Fed to hike. However, with yield volatility expected to linger in the near term, we see today’s elevated Treasury yields as an especially compelling opportunity in fixed income.

Chart of the Week | Macroeconomic

Sizing up small caps

Small caps have outperformed this year despite the threat of higher interest rates, suggesting the rally is being driven by more than just diversification away from large cap tech stocks. Improving earnings expectations and a resilient U.S. economy support our view that small caps have further upside from here.