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You Won’t See This on CNBC: An Unknown Metric Just Flashed Its Strongest Reading Since 1997

• Business equipment production just posted its fastest two-quarter rise since the Dot-Com boom - a signal that companies are ramping up investment for future growth.
  
  
• From semiconductors to heavy machinery, rising capital spending could finally reverse a decade of underinvestment and weak productivity.

What you need to know:  An overlooked but telling signal - industrial production of business equipment - is surging, marking its sharpest two-quarter rise (outside the pandemic) since the Dot-Com boom of 1997¹. It's a clear sign that capital spending by businesses is gaining momentum. 

Why it matters: These are the goods companies buy to expand capacity - from servers and tractors to industrial robots and machinery. Historically, surging production of business equipment is a strong signal that companies are betting on future growth. That kind of capital investment can lead to higher productivity, better wages, and lower prices via giving workers the tools to do more, faster. 

Now the Deep Dive: Buried in the flood of economic data, one line item caught my eye – and that is the production of business equipment. What made this stand out was the strength of its two-quarter growth rate (I actually had to double check the data manually).

Put simply. . .

• In Q1 2025, production rose 5.26%.
• In Q2 2025, it added another 2.54%.
• That’s a 7.8% gain in just six months.

But here’s where it gets interesting. If this pace continues through the year, it would amount to about 16.2% annual growth.

• That’s what “annualized” means – aka a way of asking, “What if this trend keeps going for four straight quarters?”

Thus, that 16.2% annualized rate is the largest two-quarter jump since 1997 (excluding the COVID rebound).

So, what does it mean?

Well, it’s an invigorating signal that U.S. firms are beginning to ramp up capital to boost production instead of just hoarding cash.

As many of you may know - since the pandemic - most capital allocation has favored things like buybacks, dividends, and cash hoarding.

But this surging rise in business equipment output since the Dot-Com era suggests that businesses are betting big on the U.S. economy.

Remember, you don’t order a billion-dollar semiconductor etching machine or an automated logistics system just to pad this quarter’s earnings.

You do it because you’re investing in capacity - expecting stronger demand, better margins, and more throughput down the line.

Through that lens, business equipment production becomes a proxy for corporate enthusiasm – aka a window into how confident CEOs and CFOs are in the economy ahead.

The point is - if this trend holds - it could finally break the post-2008 cycle of underinvestment and sluggish productivity that’s weighed on wages and growth for over a decade.

Figure 1: St. Louis Federal Reserve, Dunham, July 2025 

 The Froth Is Back: Meme Stocks Are Surging Again 

•  Retail investors are piling into low-priced, heavily shorted stocks again - despite higher rates and tighter wallets - signaling a surge in risk appetite late in the cycle 
  
  
• Rising money supply (M2) - boosted by surging deficits - may be quietly fueling this new meme frenzy, suggesting easy liquidity is slipping back into speculative corners of the market.

What you need to know:  “Irrational exuberance” is back as retail traders pour into low-priced, heavily shorted stocks, sending prices soaring in a meme-stock revival that echoes the frenzy of 2021². 

Why it matters: Retail traders now make up over 20% of market volume, with stocks under $5 accounting for more than a quarter of all trades. This isn’t about stimulus checks or lockdown boredom this time - it’s about sentiment. Risk appetite and liquidity are surging back even in the face of higher interest rates, tighter wallets, and trade wars. But when euphoria like this shows up, it’s usually late in the cycle - not early.

Now the Deep Dive: Well, it’s not 2021, but the meme stock show is back – but this time it’s with an all new cast.

• A meme stock = a company that skyrockets in popularity and price due to social media hype - often driven by platforms like Reddit or X - rather than actual fundamentals.

Gone are the likes of earlier meme stocks from 2021. Today’s cycle features a new batch of low-priced, heavily shorted companies from various industries - which have shown serious volatility in recent days.

But the script hasn’t changed.

Retail traders are once again plowing into these stocks, chasing fast gains by trying to force a “short squeeze” event³. And just like the 2021 frenzy that helped sink hedge funds like Melvin Capital - this one’s riding a wave of market euphoria.

For example:

• The S&P 500 is at record highs
• Cryptos have soared over the last few months
• SPACs are creeping back into headlines

Isn't it ironic that just three months ago, markets were in panic mode and plunging? Now, it feels like you have to try to lose money - a classic sign of how fast sentiment flips in these fear-and-greed cycles.

But there may be more driving this than just mood.

According to the latest Fed data, M2 - the liquid money supply - is now rising at a 4.5% annual pace, its fastest rate since July 2022. And unlike then, when M2 was falling, it’s now steadily climbing again.

That’s worrying because even with the Fed trying to tighten via higher interest rates, money is still flowing into the system - thanks to massive government deficits and steady bank lending.

So, why does this matter? Because when M2 climbs, it means the money supply is also climbing. And some of this cash flows out into meme stocks and other speculative things.

• Put another way, it’s not just about how much money is out there - it’s what people do when they’ve got more of it and fewer reasons not to take a swing.

The tickers may be new, but the playbook isn’t. And easy money on the way up rarely makes for a soft landing on the way down.

But who knows what will happen. Just beware.

Figure 2: St. Louis Federal Reserve, Dunham, July 2025

Trapped Between Giants: The E.U.’s Growing Economic Dilemma

•  The E.U.’s trade deficit with China has surged past €300 billion, as Beijing floods Europe with cheap exports while buying less in return. 
  
  
• Europe now faces a strategic squeeze - caught between escalating tensions with China and high-stakes trade negotiations with the U.S., all while its economy stagnates.

What you need to know: While U.S.-E.U. trade tensions dominate headlines, this week’s China–E.U. summit in Beijing landed with a thud. The two sides remain far apart on key trade issues - putting the E.U. in a difficult position as it tries to balance its relationships with both global powers⁴. 

Why this matters: While the media zeroes in on the U.S.-E.U. trade talks (and the looming August 1st deal-or-no-deal deadline), the bigger story may be Europe’s deepening vulnerability to China’s export machine.

I’ve written before - notably in “How China’s Manufacturing Glut and Trade Tensions Could Trigger a Global Crisis” - that Beijing is leaning on manufacturing and exports to paper over a post-bubble slowdown in housing.

• Think 2008-style collapse, but state-managed and slower.

But for China to export more, someone has to import more. And right now, that someone is Europe.

Thus, the E.U. is getting hit two ways:

1. China is buying less from Europe = hurting European firms who once depended on Chinese demand.
   
   
2. China is exporting more to Europe = flooding the market with cheap, subsidized goods that undercut domestic manufacturers.

Because of this, the E.U.’s trade deficit with China has ballooned past €300 billion – and expected to hit a record high in 2025 (at the current pace).

It’s gotten serious enough that earlier this month, European Commission President - Ursula von der Leyen - publicly accused China of flooding global markets with cheap, subsidized goods and that entire Western industries are folding under the weight of it⁵.

But so far, China isn’t giving Europe an inch. If anything, it sees the E.U. as a direct competitor - not a partner - as both economies depend on exports. So don’t expect this to change anytime soon.

Meanwhile, E.U.-U.S. trade talks aren’t exactly smooth either - but Europe can’t afford to alienate both Washington and Beijing.

So, if Brussels has to pick a side, I’d wager it’s likely to cut a deal with the U.S., even if the terms are less than ideal.

• Like they say, better to dance with the devil you know.

So while the headlines are focused on the U.S.-E.U. standoff, keep an eye on the East.

Because the E.U.–China trade rift isn’t cooling down - it’s just getting started.

 Figure 3: Bloomberg, July 2025 

Anyway, who knows what will happen?

This is just some food for thought as we watch how these trends develop.

As always, we’ll be keeping a close eye on things.

Enjoy the rest of your weekend.

Sources:

1. Scoop: The overlooked data Trump economists see predicting a boom ahead
2. Meme Stocks: Krispy Kreme, GoPro Surge In Early Trading - Bloomberg
3. Meme Stocks Are Back—Should You Be Worried?
4. EU leaders brace for frosty China summit as trade frictions bite | Reuters
5. EU Chief Demands China Address Trade Imbalance as Tensions Flare - Bloomberg

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