Comments based on information available as of 7:10am CT on 8/1/2025
Growth: How Low Can You Go? 
Headline gross domestic product (GDP) rebounded from the decline in the first quarter, but headlines can be misleading. Final sales to private domestic purchasers–sometimes viewed as a cleaner reading of private sector health–slowed again in the second quarter. Growth was 3.4% annualized in the third quarter of 2024 and has been on a decline since. The momentum may shift with more tariff and tax clarity, but the momentum shift can take time.
Inflation: Push And Pull
The Fed’s preferred measure of inflation, the personal consumption expenditure deflator, moved higher in June. Services inflation has been falling while goods inflation has been rising. The net effect in June was a slight uptick in inflation, but services make up nearly 69% of personal consumption expenditures and goods make up 31%. While everyone is focused on tariffs and inflation, the bigger story might be that services inflation is slowing and that’s likely going to be the dominant driver of inflation over the longer-term.
Policy: Pick A Lane!
It’s annoying following someone on the road where they straddle lanes or drift between them. Most of the time during Powell’s tenure as Chair of the Fed they were in the backward-looking lane that he called “data dependent.” During the rapid inflation coming out of COVID, and again now, they shifted lanes into trying to anticipate the data instead of reacting to it. Maybe the Fed should just pick a lane and stick with it.
Looking Ahead: The Coast Is Never Clear
With the trade deadline behind us and the One Big Beautiful Bill passed, you’d think there’s finally some certainty, right? Nope. Never. Last year, it was the election. This year, it’s been tariffs. Now it’s the Fed and the ripple effects of those tariffs. Next, it could be earnings, valuations, a government shutdown, the upcoming mid-terms—who knows? There’s always something. Markets don’t like uncertainty, but uncertainty is always there. The key is learning to live with it. And there are a few timeless principles that can help: diversify, stay patient, and maintain enough liquidity to meet short-term needs, allowing you to be patient.
