Comments based on information available as of 7:20am CT on 7/18/2025
Growth: More Than A Bounce? 
Recent data suggest the U.S. economy may be on firmer footing than previously thought. Industrial production rose 0.3% in June, beating expectations, while retail sales rebounded with a 0.6% increase. The gains were broad-based, hinting at renewed consumer resilience despite what sentiment surveys may say. Initial jobless claims dipped to 221,000, further evidence of labor market stability. There are continued signs of unevenness, though. The bounce in growth may have legs, but underlying momentum is modest, not explosive. It may take a few months to see the reacceleration in the data, though.
Inflation: Creeping Higher
Inflation is inching upward again, though not alarmingly so. Juneās CPI rose 0.3% month-over-month and 2.7% year-over-year, with core CPI up 2.9%. Tariffs have begun to affect pricesāespecially in sectors like appliances and building materialsābut their weight in the consumer price basket is small. Services inflation remains subdued, with lodging away from home notably falling. PPI held steady month-over-month, with travel-related services offsetting goods price increases. Input cost pressures are real, but their transmission to broad inflation remains limited so far.
Policy: Unyielding
The Federal Reserve shows little appetite for rate cuts. President Trump has little appetite for making major concessions on trade policy. These unyielding positions could combine to squeeze profit margins, for now. Thankfully, it’s not like these policy stances are news to anyone. Markets have a great–albeit, imperfect–way of pricing this type of stuff in. Maybe the next surprise is that the Fed is actually open to cuts (just not yet) and trade policy, after being considered along with tax policy, doesn’t have to lead inevitably to a recession.
Looking Ahead: Dog Days
The July through early August period is known as the Dog Days of Summer. In many areas, the heat and haze can be unbearable. Despite the weather, after we get through the “deadline” for tariffs, the power of the tax incentives to build and invest contained in the One Big Beautiful Bill may kick in. While that can move the needle on economic growth, the market can march to the beat of its own drummer. There are likely areas where expectations are too pessimistic and other where expectations are too optimistic. Broadly, the heat and haze of summer may not lift until the economic data confirm what we expect: that while growth has slowed, it’s more likely to reaccelerate than stop.
