Greetings,

Headline economic data and the stock market have looked fairly strong in recent months, but much of that is attributed to AI spending. What does that mean for the rest of the US economy? Well, many businesses continue to struggle with higher costs, tariffs and cautious consumers. 

Also in this edition: 

• What's next for the Fed's monetary policy? 🤔
• Wall Street structuring bets on potential tariff refunds 💱
• US business activity rises in October, but sentiment drops 📈
• US companies see spending split amid inflation, tariffs ✂️

AI-driven capital expenditures have become a major force behind recent US economic growth, contributing 1.1% to GDP in the first half of 2025 and helping push overall GDP up at a 3.8% annual rate in the second quarter. Major tech companies tied to AI have seen soaring stock valuations, driving significant gains in the S&P 500 and Nasdaq. However, this AI-fueled expansion is primarily concentrated in a handful of mega-cap firms, creating a disconnect between headline economic indicators and the struggles of other sectors.

Markets anticipate another interest-rate cut this week, but uncertainty remains about the future path of monetary policy. Progress on inflation has leveled off, and the latest data "keeps the Fed in an easing bias in October," according to Wells Fargo's Nicole Cervi. "But the underlying picture hasn't really changed on inflation."

The US and China have reached a preliminary consensus on a number of topics, potentially setting the stage for President Donald Trump and Chinese President Xi Jinping to finalize a deal. The US' earlier threat to impose a 100% tariff on imports from China "is effectively off the table," according to Treasury Secretary Scott Bessent. Separately, the US has also announced trade deals with Cambodia and Malaysia.

Wall Street banks are facilitating trades that bet on the Supreme Court striking down President Donald Trump's tariffs, potentially leading to significant refunds for importers. Jefferies Financial Group and Oppenheimer & Co. are among the firms involved, matching investors with companies that have paid tariffs. Investors buy future rights to tariff refunds at a discount, hoping for a favorable court ruling. The Supreme Court will hear arguments on the tariffs Nov. 5, with a decision expected by early 2026.

President Donald Trump has nominated Mike Selig, a longtime crypto ally and current SEC Crypto Task Force general counsel, to chair the Commodity Futures Trading Commission, with Selig pledging to help make the US the "Crypto Capital of the World." While a market-structure bill is stalled in the Senate, the CFTC is expected to play a central oversight role in crypto markets if it advances.

US business activity increased in October to a three-month high, with the S&P Global Composite PMI Output Index reading 54.8, up from 53.9 the previous month. The improvement was driven by the services sector, which increased from 54.2 to 55.2. Manufacturing edged upward from 52 to 52.2, with the manufacturing output index rising from 52.4 to 52.8. However, business sentiment has declined, with companies expressing concerns about trade policies and decreasing export orders. Companies also reported holding onto unsold goods and light hiring.

Free trade agreements offer significant opportunities for companies to achieve duty savings and enhance supply chain resilience. While FTAs can lower or eliminate tariffs and provide more stable sourcing channels, many organizations have hesitated to leverage them due to perceived complexity in compliance and documentation. However, recent advancements in supply chain management software have made qualifying for and managing FTAs easier. Companies embracing these tools can transform trade compliance operations and reduce costs by capitalizing on available FTA benefits.

A widening economic divide is impacting US businesses. Companies that serve lower-income consumers are facing declining sales and profits, while affluent households continue to sustain overall spending. Lower-income consumers are delaying purchases, seeking discounts and struggling with affordability as inflation remains elevated. Some companies are adapting products for both ends of the market, while firms reliant solely on budget customers are experiencing financial strain and workforce reductions.

Economists estimate that the ongoing US government shutdown is reducing annualized GDP growth by 0.1 to 0.2 percentage points each week, primarily driven by declines in consumer spending and federal worker productivity. While most of the lost output is expected to be recovered once the government reopens, the longer the shutdown lasts, the more permanent the economic losses may become, particularly for affected households.

JPMorgan Chase reportedly plans to let institutional clients pledge ether and bitcoin as collateral for loans by year-end, which would mark a major step in Wall Street's embrace of digital assets. The global program, using a third-party custodian, would expand on JPMorgan's acceptance of crypto-linked exchange-traded funds as collateral, and it follows broader regulatory easing under the Trump administration.

Integrating AI into accounts receivable functions enables companies to automate labor-intensive tasks, boost cash flow predictability and scale operations without hiring additional staff, according to a Wakefield Research and Billtrust study. While most organizations are actively deploying or experimenting with AI in AR, ongoing challenges such as integration issues and the need for employee buy-in remain key factors in fully realizing its potential.

The Washington State Board of Accountancy approved a new pathway for CPA licensure that eliminates the requirement for 150 college credit hours, allowing candidates to become licensed with a bachelor's degree, two years of work experience and passage of the CPA exam. The rule, which could take effect as soon as next month, is part of a broader trend, with at least 22 other states having enacted similar measures to address an accounting talent shortage.

If you struggle with productivity, it may be that the tools you're using are misaligned with your natural cognitive style, writes Deliberate Direction's Allison Dunn, who outlines four dominant styles, including those who are driven by logic and data, those who are collaborative and those who pay attention to detail. Dunn suggests tools that match each style as well as tips on arranging your workspace to optimize your time.

If you have a minute, please reach out and let us know how we're doing. Tell us if there's content you'd like but aren't seeing, or if you're seeing content that isn't useful or interesting. See a story we should be covering? Send it over! And a huge thank you to those of you who have already reached out.

You can reach us at matt.reitz@futurenet.com.