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Economy's Rate Sensitivity Declined
- The economy has become less sensitive to interest rate changes, weakening traditional Fed stimulus effects.
- Rate hikes and cuts have limited impact on economic growth but affect consumer income via interest-bearing accounts.
Deficit Worries Hinged on Trust
- The growing U.S. budget deficit is manageable if the government maintains fiscal discipline and Fed independence.
- Maintaining trust in fiscal and monetary policy is critical to avoiding a debt crisis despite rising debt-to-GDP ratios.
Earnings Beat Expectations Despite Warnings
- Corporate earnings have so far exceeded expectations despite cautious guidance reflecting tariff challenges.
- Companies act conservatively to adapt to slower growth, complicating interpretations of earnings strength.