Greetings,

Despite being weighed down by persistently high borrowing costs, US companies are poised for a bumper earnings season. Why? It's all that AI spending. More on that below.

Also in this edition:

• US trade deficit widens to $105.6B as imports surge
• Supreme Court weighs PE firms' access to 401(k)s
• Can Bessent's plans really narrow the deficit?
• CFOs, CEOs differ on how to handle disruption risks

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US companies are poised for another strong earnings season, driven by significant spending on artificial intelligence infrastructure. Goldman Sachs forecasts a 27% increase in S&P 500 earnings for the third quarter, with all sectors expected to report growth. While energy companies are expected to benefit from rising oil prices, the majority of growth will come from major technology firms such as Meta, Alphabet and Broadcom.

The US trade deficit widened to $105.6 billion in August, the largest gap since March 2025, driven by a 4.3% increase in imports, particularly goods related to artificial intelligence and import tariffs, according to the Commerce Department. This surge has led Goldman Sachs to revise its third-quarter GDP growth estimate to 3.1%, while the Atlanta Federal Reserve's GDPNow tracker has adjusted its estimate to 3.7%.

The US Supreme Court appears to be leaning toward a ruling that could aid private equity firms' access to 401(k) retirement accounts. During arguments in Anderson v. Intel, the justices seemed skeptical of the challenge, which centers on when employees can sue employers over risky investments in retirement plans.

Treasury Secretary Scott Bessent said stronger economic growth and spending restraint can reduce the federal debt-to-GDP ratio, but market strategists questioned whether growth alone can meaningfully narrow deficits. Economists expect this year's deficit to remain around 6% of GDP, while higher Treasury yields are adding to borrowing costs. Bessent has targeted a deficit of 3% of GDP.

Cryptocurrencies dropped as forced selling and broader market jitters led to the liquidation of $720 million in positions. Bitcoin fell as much as 3.3% to $82,759, while Ether slumped 5.9% to $2,540. Shares of crypto-linked companies also declined, with Coinbase Global down as much as 4.4% and BitMine Immersion Technologies off as much as 7.3%.

Efforts to pass comprehensive crypto legislation have faced significant obstacles, as highlighted by the failure of industry-backed bills in the Senate. Despite efforts from the CFTC and the SEC to enforce regulation, the real barrier seems to be the industry's reluctance to submit to traditional regulations. This ongoing legislative gridlock underscores the challenge of reconciling industry demands with existing legal frameworks.