Comments based on information available as of 7:20am CT on 7/11/2025

Growth: Clouds Are Clearing 

The first half of the year was dominated by uncertainty over tariffs, taxes, and geopolitical tensions. For now, conflicts in the Middle East seem to have calmed, and the major tax bill—the “One Big Beautiful Bill”—has passed. The remaining uncertainty centers on tariffs. It will take time to see how all these changes play out, but the growth gains from the tax bill–for many firms–could more than offset the hit from tariffs.

Inflation: It’s Now Or Never

Tariffs are already in place and showing up in various ways. Some companies are passing costs on to consumers, some are absorbing them, and others are squeezing out efficiencies elsewhere. Many Fed officials are effectively saying, “Just wait” as they still expect consumer price inflation to increase. However, if the upcoming consumer price index doesn’t show early signs of rising inflation, markets may grow impatient with the Fed’s wait-and-see approach.

Policy: Waiting For The Main Event

With the tax bill behind us, attention has shifted to tariffs. Between now and August 1—the updated deadline for new tariffs—we could see a surge of trade deals. The most closely watched will be with Mexico, Canada, China, Germany, and Japan, which together account for over half of U.S. goods imports. Every deal matters, especially for the exporting countries, but the ones with the biggest economic impact on the U.S. are still pending. It wouldn’t be surprising to see President Trump play hardball up to the last minute to get as many concessions as he can.

Looking Ahead: Valuations Pose Risks

While business earnings fundamentals look solid, caution is warranted—mainly because of high valuations. Valuations are poor timing tools, but they do help gauge upside and downside risks. Considering where valuations are, as earnings season begins, it’s reasonable to expect that earnings misses could have a bigger market impact than positive surprises.