Defying Headwinds, the U.S. Economy Continues to Flex Its Resilience

• Labor force participation rose to 61.6% (highest in roughly a year) while the U-6 underemployment rate declined from 8.7% in November 2025 to 7.7% in August
• ISM Services PMI reached 55.4 in August, marking nine consecutive months above 53 and indicating strong expansion with business activity at multi-year highs
• Real personal income excluding transfer receipts fell 0.38% year-over-year in July for the fifth consecutive negative reading, with strain concentrated at lower income levels

Market Summary: U.S. Economy Demonstrates Resilience Amid Mixed Signals

Employment Strength

August nonfarm payrolls surged by 162,000 jobs—roughly triple consensus expectations—following July's disappointing print. Positive revisions lifted June to +31,000 and July to +21,000 from negative territory. Labor force participation climbed to 61.6%, the highest in approximately one year, while unemployment remained steady at 4.1%. The U-6 underemployment rate improved from 8.7% in November 2025 to 7.7% in August. Average hourly earnings rose 0.3% month-over-month, meeting expectations.

Areas of Concern

Real personal income excluding transfer receipts declined 0.38% year-over-year in July, marking the fifth consecutive negative reading. This pressure is particularly acute for lower-income households.

Business Sentiment Improving

The JP Morgan Global Composite PMI indicates the fastest growth in over two years. The ISM Services PMI reached 55.4 in August, marking nine consecutive months above 53, with business activity and new orders hitting multi-year highs.

Investment Implications

Shelton Capital Management maintains an overweight position in equities versus bonds, favoring U.S. equities over international. Within equities, information technology remains the largest sector allocation, with tactical opportunities identified in financials (regional banks) and healthcare.

For fixed income, the firm prefers the middle of the yield curve, favoring high-quality asset-backed securities and corporate bonds while underweighting U.S. Treasuries.

The Cash Indicator currently reads 11.26, well below its long-term median of 25, suggesting market confidence but potentially indicating complacency that could precede higher volatility.

Shelton Capital Management oversees $7.8 billion in assets as of June 30, 2026.