The economic expansion continues to prove stronger than many investors expected. The Atlanta Fed’s GDPNow model puts third-quarter real GDP growth at a 5.0% annualized rate, business activity is accelerating at its fastest pace in more than five years, and the S&P 500 just closed out a second quarter in which earnings grew 50.4%, per FactSet.
That strength is creating a paradox. A stronger economy supports revenues and profits — but it also reduces the case for easier monetary policy and increases competition for capital. The Federal Reserve raised rates again in September, long-term yields remain elevated, and companies, governments, and AI infrastructure projects are all borrowing from the same pool of global savings. Bespoke Investment Group estimates investment-grade corporate bond issuance is on pace to exceed $2.2 trillion this year.
There’s a constructive wrinkle in the valuation picture, though. Goldman Sachs found that the S&P 500’s forward P/E has fallen from roughly 22 times earnings at the start of 2026 to about 19 times — even as earnings estimates have continued to rise. Multiple compression driven by stronger earnings is a very different story than compression driven by falling prices.
Continue reading the full September commentary — including why higher real yields aren’t necessarily a credibility problem, what the AI capital-spending cycle is and isn’t contributing to growth, and what the firm is watching into October.
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