Markets are under pressure from worse than expected economic growth data and concern that large moves in foreign markets driven largely by technical factors may continue to push stocks lower.

It is important to keep calm and put the recent move in context.

First, the S&P 500 is still up high single digits this year, and the magnificent seven remains in heavily positive territory, up more than 20%. We have also seen a significant broadening in the market with value and dividend-based stocks and sectors such as energy, industrials, and financials significantly outperform relative to the S&P 500 since early July.

One of the keys to success for the remainder of this year and beyond was a handoff between tech companies and the rest of the market. Even though the Magnificent 7 are on track to post 30%+ earnings growth, those companies are now in a downward earnings trend, and it will be critical for other companies to perform well, which so far through Q2 earning season appears to be happening.

After 75% of the S&P 500 has reported, earnings remain resilient with Q2 earnings at 11.5%, more than 3% higher than expectations and the highest since Q4 of 2020. In pockets of the market, we are also seeing upward revisions to earnings guidance, so there is quite a bit to be positive about in terms of company performance.

On the economic growth front, the combination of poor manufacturing reports and jobs data helped to spark the selling. But one set of numbers does not make a trend. There are reasons to like this jobs report. For starters, the economy did add jobs, and the share of prime age workers in the labor force rose to 80.9%. And that's a cycle high. The participation rate for this group rose to 84%, the highest since 2002. So, while the pace of hiring is slowing, jobs are not being cut, and this continues to be in-line with our expectations for slowing growth, not a tip over into recession.

And despite the calls for the Fed to cut more deeply and sooner, Chicago Fed President Goolsbee stressed that the Fed should not overreact to one data point, and we agree and believe the Fed will remain steady in their policy implementation by cutting rates at the September meeting.

The last factor I want to discuss is what's happening with the Japanese market. In a nutshell, because rates have been so low for so long in Japan, traders would borrow Japanese currency and invest it in all kinds of markets around the world. When the Japanese currency strengthens, traders lose money on these transactions, and it does result in a quick unwind of these trades. Reports indicate the volume of these unwinds was very high on Friday and during the Asia session last night. However, trading desks were reporting this morning that activity in those trades has slowed significantly. And because of this, it is likely that we've seen the highest level of selling pressure from this technical aspect. In support of this, the Japanese market is indicating a strong positive move after significant declines.

In bringing it all together, interest rates have remained very stable, and this will help calm the moves across markets. And we believe the fundamentals will become the main focus as we move through this market activity, which should help stabilize returns.

So, while moves like this can be abrupt and shocking, ultimately, we do believe the economy remains on a good trajectory with solid corporate earnings, a strong consumer, and a decelerating but normal growth rate of about one and a half to two percent as we move into the back half of the year.