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Our offices will be closed Monday for the Labor Day holiday. Enjoy the long weekend! SEPTEMBER 4, 2026

Happy Labor Day! While the holiday honors the contributions and achievements of American workers, it also marks the ‘unofficial’ end of summer. Whether you’re enjoying a backyard barbecue, a trip to the beach, a local parade, or simply time with family and Fiscal Sustainability Has Returned friends, there are plenty of ways to make the most of the long weekend. For investors, To The Spotlight however, Labor Day signals more than summer’s end. It marks a return of focus to the economic and market forces that will shape the remainder of the year. While students Debt Has Become A Critical Funding head back to school, investors head back to business (though this summer offered little Source For Hyperscalers downtime for market watchers). From resilient earnings and record AI spending to rising bond yields and the midterm elections, there is no shortage of forces shaping the market 2026 May Mark Peak Earnings Growth, outlook. Below, we examine several key questions facing investors and share our But Not Peak Earnings perspective on how these trends may unfold in the months ahead.

• Is The Consumer Tapped Out? | Recent data suggest consumers are becoming more selective, as retail sales soften, some retailers report signs of strain, and the savings rate remains low. With consumer spending accounting for ~70% of GDP, any slowdown bears scrutiny. Our View: The consumer is not tapped out, but spending is increasingly reliant on higher-income households. Strong balance sheets, rising asset values, and wealth gains continue to support spending at the top end, while lower-income consumers remain pressured by higher living costs and limited savings. This imbalance leaves consumption more vulnerable to inflation, labor market weakness, or other shocks. For now, affluent consumers continue to power spending, helping sustain economic growth. • Will the Growing US National Debt Trigger a Crisis? | Last month, the national debt surpassed $40 trillion for the first time, roughly double 2017 levels. As fiscal sustainability returns to the spotlight, concerns about a potential debt crisis are growing. Our View: Rising debt, persistent deficits, and higher interest costs (now over $1 trillion annually) are increasing pressure on government finances. Yet despite years of warnings, a debt crisis has yet to emerge. Could this time be different? While risks are building, we believe the US has more flexibility than many headlines suggest. The US borrows in its own currency, the dollar remains the world’s reserve currency, and demand for Treasuries remains solid despite heavy issuance. Eventually, Congress will need to address the fiscal trajectory. For now, however, the greater risk is not a sudden debt crisis, but a gradual erosion of fiscal flexibility over time. • Is AI Debt Issuance Driving Yields Higher?| As hyperscalers race to build AI infrastructure, debt has become a critical funding source. With AI spending likely to exceed ~$1t annually from 2027-2030, some investors worry that AI-related borrowing is pushing bond yields higher. Our View: AI-related debt issuance has surged, with hyperscaler borrowing rising from an annual average of $22 billion in 2022-2024 to $93 billion in 2025. YTD issuance is approaching ~$160 billion and exceeds $220 billion including foreign currency issuance. While still modest relative to the overall corporate bond market, the rapid increase is creating pockets of supply pressure. Hyperscalers accounted for ~1% of investment grade issuance in 2024 versus about 10% YTD, with nearly half issued at longer maturities. That may be contributing to higher yields at the margin, but it is not the primary driver. Importantly, demand remains strong, with many deals oversubscribed by ~3-to-1. In addition, hyperscalers continue to deliver robust earnings growth, helping justify the massive investments being made in AI infrastructure. • Does Peak Earnings Growth Imply Earnings Have Peaked? | With 2Q26 earnings posting their strongest gain in five years, up 51% YoY including one-time investment gains, investors are asking…