In today’s Steady Investor, we look at what’s driving markets now and the potential risks ahead, including:
Business Investment Improves Amid Policy Uncertainty – The U.S. economy has been sending mixed signals lately, but data released this week shows underlying strength. Core capital goods orders (non-defense, ex-aircraft) rose a stronger-than-expected 1.1% in July, fully reversing June’s decline. Shipments of these goods also climbed 0.7%, the largest increase in more than two years. Since this component feeds directly into GDP calculations, the report bodes well for third-quarter economic growth. Given recent concerns about weaker hiring and soft retail spending, the numbers offer some relief. But there’s a potential caveat to keep in mind. Some of the rise in orders and shipments may reflect higher prices, not necessarily higher volumes, as rising input costs from tariffs continue to weigh on manufacturers. Importantly, this data isn’t inflation-adjusted, and with manufacturing relying heavily on imported raw materials, this could be an important factor. While the July data was encouraging, uncertainty continues to cloud the outlook, and we’re seeing that companies are moving forward on essential projects but appear hesitant to expand beyond the basics. In short, the durable goods report was a reminder that business investment isn’t cratering, but it’s also not booming. That’s not a bad backdrop for markets.1
Uncertainty Is Back in Focus. Position Your Portfolio with Confidence.
Markets are being pulled in different directions as economic data softens and new policy shifts take shape. For investors, the challenge is separating noise from real signals and staying disciplined when the outlook feels unclear.
Our free August 2025 Zacks Market Strategy Report2 breaks down the latest trends and what they could mean for your portfolio, such as:
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The U.S. and China Quietly Resume Trade Negotiations – For the first time in years, a senior Chinese trade official visited Washington, signaling a potential thaw in U.S.-China relations during a fragile tariff truce. Li Chenggang, a top aide to Beijing’s lead negotiator He Lifeng, met with U.S. trade and Treasury officials, as well as representatives from the American business community. The visit follows an agreement earlier this summer to extend a pause on additional tariff increases through early November, a truce that includes selective rollbacks of existing duties and easing of export restrictions on key industrial goods.The renewed dialogue reflects a subtle, but welcomed, shift in tone from both countries. We would mark this as progress, but trade tensions remain elevated. The U.S. has not backed down from pressuring Beijing to increase purchases of American agricultural goods, and the administration is preparing to intensify enforcement on imports of steel, copper, and lithium.For its part, China has conditioned any new purchases on the removal of Trump-era tariffs tied to fentanyl trafficking, and Beijing continues to lobby for looser restrictions on U.S. chip sales. Still, some business leaders are cautiously optimistic. Sean Stein, president of the U.S.-China Business Council, welcomed the resumption of direct talks and emphasized the importance of addressing structural trade concerns that extend well beyond tariffs and export controls.3
Is AI’s Threat to Software Giants Overstated? AI might be coming for a lot of industries, but one it hasn’t overtaken, despite headlines, is enterprise software. Global spending on business software is projected to hit $1.2 trillion this year, up nearly 11% from 2024, according to Gartner. That makes it one of the largest and fastest-growing tech categories globally, which is hardly the profile of an industry on the brink of obsolescence.Still, AI’s rise has sparked plenty of speculation. Some believe tools like ChatGPT or the newly launched GPT-5 could let people build custom software just by describing what they want in plain language, a trend dubbed “vibe coding.” The idea is that if you can describe it, the AI can build it. But translating a few spoken sentences into complex, mission-critical business systems is a much taller order than whipping up a flashcard app or summarizing a memo.While companies across the software spectrum are actively embedding AI into their offerings, there’s little evidence that the tech is poised to replace large-scale, regulatory-heavy software suites, especially those used for sensitive tasks like payroll, HR, or financial reporting. The reality is that enterprise software is deeply embedded, often bespoke, and carefully vetted for compliance and control, areas where AI still struggles. Analysts have noted that existing business software ecosystems involve workflows with “meaningful complexity,” and that even advanced AI systems today aren’t equipped to seamlessly take them over.It’s worth remembering: new technologies often generate breathless forecasts that don’t pan out on schedule. The same may prove true for AI’s impact on enterprise software. While the long-term potential is vast, near-term disruption may be more measured and uneven. In our view, mature software providers, particularly those deeply entrenched in core business functions, are less likely to be replaced and more likely to evolve.4
Shifting Signals in the Market—What Should Investors Do Now? Markets are sending mixed messages, and the outlook is anything but clear. The key is knowing which shifts to watch and how to respond with discipline.
Our free August 2025 Zacks Market Strategy Report5 breaks down the latest developments and offers perspective on what they could mean for your portfolio. Get your copy today and stay informed on key market themes, including:
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Disclosure