Better-than-anticipated economic data reduced rate cut expectations, but markets continued their year-to-date advance.

It appears that new tariffs are starting to affect consumer prices. In the June inflation report, headline CPI accelerated to 2.7% over the prior 12 months, up from 2.4% in May. Core CPI (which excludes food and energy) rose 2.9%, the fastest pace since February. On a monthly basis since May, the headline index increased 0.3% while core rose 0.2%.

Equities and bonds fell as the market digested the reconciliation bill and a new tariff deadline.

Are we at the peak of the business cycle, or are we still in growth mode? Estimating our current position in the cycle has important implications for portfolio allocation, as asset classes can perform differently in each stage. One way to make that estimation is via the high yield bond spread—and here’s what it has to say for allocators.   

The U.S. economy and equity markets remain on solid ground at the start of the third quarter, although economists are waiting for tariff impacts to show in the hard data.

With the first half of 2025 in the books, the global economic environment remains clouded by policy uncertainty. Over the past few weeks, a steady stream of economic data has reinforced a familiar narrative: while soft data has been volatile, hard data continues to show resilience.

U.S. equities hit a record high while Treasuries rallied as markets exhaled a sigh of relief over moderating macroeconomic factors.

Over the past week, a growing number of Federal Reserve (Fed) officials have signaled that interest rate cuts could come as early as July—a more “dovish” outlook. This is a notable pivot from the wait and see tone (a “hawkish” outlook) that had dominated recent months.

Geopolitical tensions, continued tariff worries, and the Senate’s version of the reconciliation bill weighed on markets.

Despite significant market volatility and policy shifts, the U.S. economy enters a new paradigm with a solid foundation.