The S&P 500 dropped 1.63% as investors questioned whether AI stocks had climbed too high, too fast. Meanwhile, consumer sentiment crashed to levels not seen since 2022, and the government shutdown left us flying blind on critical economic data. Here's what the numbers we do have are telling us about where markets—and the economy—go from here.
While equity markets grind higher on AI euphoria, the real economy tells a different story. Harvard economist Jason Furman recently quantified something extraordinary: AI infrastructure investments accounted for 92% of U.S. GDP growth in the first half of 2025, despite representing only 4% of total GDP. Strip out those technology investments, and GDP growth would have been essentially flat at just 0.1% annualized. This isn't normal economic expansion—it's one sector carrying the entire statistical appearance of growth while the broader economy treads water beneath the surface.
The S&P 500 closed this week essentially flat after a volatile stretch that saw fresh records evaporate within days. Meta's $72 billion AI spending plan triggered investor doubts about return on investment, while the Fed's cautious rate-cut outlook pushed bond yields higher and pressured stocks. Beneath the surface calm, major economic indicators are sending conflicting signals about what comes next.
The Federal Reserve just cut interest rates by 0.25%, so why did mortgage rates climb higher instead of falling? The answer reveals a crucial disconnect between Fed policy and the bond market—and what it means for your borrowing costs in the months ahead.
The S&P 500 climbed 1.92% this week on better-than-expected inflation data, but beneath the surface, fundamental disconnects are growing. The Buffett Indicator now stands at 223%—exceeding Warren Buffett's "playing with fire" threshold by 23 percentage points. Meanwhile, AI infrastructure investments continue fueling tech valuations despite questions about when massive spending translates to actual profitability. This week's analysis examines current market valuation metrics, the AI investment cycle, and diverging manufacturing indicators.
JPMorgan's CEO issued a stark warning this week about credit markets: "When you see one cockroach, there are probably more." Two auto lender bankruptcies have exposed $2.3 billion in hidden loans and potential fraud—but the real concern runs deeper. After years of artificially inflated credit scores from pandemic stimulus, borrowers who never should have qualified are now defaulting as financial pressure returns. With private credit markets doubling to $1.7 trillion since 2020 and almost no oversight, even sophisticated investors like JPMorgan are getting burned. This week's economic dashboard examines the warning signs emerging across consumer confidence, housing, and rate expectations.