Insights Weekly Research Briefing

It's that time of year again when the Kansas City Fed invites the world's central bankers to a week of fly fishing, whiskey drinking and economic modeling. This year's event will have added interest given the continued pressures of the White House on the US Central Bank. The Fed's dual mandate of low inflation and employment stability is at a crossroads right now as the trade war has slowed US production while also lifting costs to businesses and the consumer.

The US stock market continues to put on its own light show with another strong bounce last week to move its year to date gain to +8%. The slowing jobs environment has continued to arm the doves with ammo for a future Fed easing in September. And in the other corner are the hawks who are watching the new tariffs agitate prices higher.

The biggest news from last week was that Friday's job numbers showed that US job growth is clearly slowing. The last three months of data now shows that if not for the healthcare and social assistant categories, the US economy would have lost jobs for each month. In other words, the US goods producing industries are failing to create net new jobs no matter the new tax breaks or perceived threats of tariff actions.

If the news flow was a drop of water then this week we would be looking at a raging waterfall. Even more appropriate then that we came across this shot of the largest volume waterfall in the Americas which sits on the American/Canadian border. For most of us who live in the states, the tariff decision between the two countries needs to be reached this week as it will affect our future cost of cars/trucks, electricity and maple syrup.

Don't worry, you won't be the only one taking those calls from outside the office this week. With summer in full swing and a light economic calendar on deck, many market participants will be listening to those earnings calls from anywhere else but an office building.

Rise and shine investors because you have seen this day before. Most of you are planning on starting the morning off with a big breakfast TACO. A few of you are readying yourself for a bowl of mush and a glass of Postum. Either way, the White House is back to demanding extremely high tariffs once again on all foreign imported goods. With the stock market trading back to its previous high valuation, it is saying that the new tariff rates will not make it to August 1st.

Joining this year's July 4th nighttime festivities will be the U.S. financial markets which after difficult March and Aprils, rebounded to the sounds of a John Philip Sousa march. Count me as surprised to see US stocks at all-time highs, credit spreads near 20-year lows and US Treasury yields near 20-year lows.

The summer weekend began with a major geopolitical event on Saturday. As of now, we do not know if this event will add or subtract a risk factor to the financial markets. While we are hopeful that the weekend strikes will be a one-time event that will cause an increase in peace for the Middle East, it is up to Iran to decide its next move.

Believe it or not, the back half of 2025 is rapidly approaching. While we choose our line to get the portfolio ready for the last six months, the news stream continues to flood the zone with information both important and meaningless. While the motherboards in the servers with the trading algorithms are near meltdown, as long term investors, we can take a slower and more observatory approach. So what are the markets telling us right now?

Where we are now is that stocks continue to recover and point to better days ahead. The equity market recovery has provided a new window for tapping the risk markets either via an IPO, secondary or selling debt. And given the reception to the deals, investors want to put money to work.

The inexpensive foot coverings are great for summer strolling and poolside patio navigating, but they are not ideal for path hiking or street running. Equally put, White House tariff flip flopping could be good for some short-term traders, but the lack of certainty is not helpful for long term investors or managers of any sized business.

While the kids get in the water, U.S. stocks emerged from their 2025 dunking as the S&P 500 moved into positive territory last week. Global stocks bounced 4-5% as the world lowered their recession forecasts and raised their earnings estimates and price targets post a White House retreat on China tariffs.