Market and Economy

• The Fed cut rates by 25bps to 3.75-4.00% as the labor market showed signs of deteriorating faster than inflation.
• Markets largely expect another 25bps rate cut from the Fed in December, regardless of data constraints from the shutdown.
• Nvidia (NVDA) shattered records, becoming the first company to reach a $5 trillion market capitalization.
• OPEC+ paused oil output hikes for Q1 2026, signaling concerns about a supply glut amid slower global growth.
• Natural gas prices rallied on high LNG export demand and updated models showing early cold fronts.

• Core PCE rose 2.9%, below the 3.0% estimate.
• At the September meeting, the FOMC cut rates 25 bps, citing rising labor-market stress.
• Yield curve has steepened: the 2/10 spread widened to 50 bps from 37 bps earlier in the year.
• Fed dot plot projects 50bps of cuts through the end of 2025, with an additional 25bps during 2026.
• With zero spending bills passed in time, Goldman Sachs estimates 0.2% annualized real GDP drag per week.

• Fed Chair Powell hinted at prioritizing employment stability over the strict 2% inflation target during Jackson Hole.
• Job growth since June marked the weakest stretch since 2008, though unemployment remains near 4.2%.
• Consumer credit stress is mounting, with credit card delinquencies at a 14-year high and student loan stress rising post-relief.
• Consumer sentiment is historically weak, with middle- and lower-income households reporting worse conditions than in 2008.
• Corporate insider selling has reached record levels, raising caution as buybacks surge despite weak insider confidence.

• Labor market signals weakening with July non-farm payrolls adding a scant 73,000 jobs following a 258,000 downward revision to prior months; the unemployment rate held at 4.2%.
• A divided FOMC (9-2 vote) held rates steady, with the majority prioritizing inflation risks from new tariffs over dissenter concerns about a weakening economic outlook.
• US corporate investment sentiment in China hits a record low, with only 48% of surveyed firms planning new in-China investments in 2025, down from from 80% in 2024.
• The House passed the GENIUS Act, establishing a federal regulatory framework for the $267 billion stablecoin market.
• New tariff regime is estimated to cost the median US household an additional $2,200 annually.

• The Fed maintained hawkish stance through June, with 80% of economists projecting Fed Funds Rate will not fall below 3.75% during 2025, as tariff considerations fundamentally altered monetary policy calculus
• Current fiscal trajectory projects 2.9% lower real GDP by 2054 due to higher-for-longer interest rates and government spending redirection toward debt service obligations.
.• Core PCE reached 2.7% (10bps above expectations), indicating continued inflationary pressure.
.• Oil price volatility reflecting diminished OPEC+ production discipline alongside Middle Eastern conflict fears.

• Trump’s 90-day tariff pause expires July 9th with minimal progress on trade deals – only the UK has agreed to a largely symbolic arrangement
• US-China tensions persist despite temporary tariff reductions from 145% to 30%, Trump and Xi scheduled to speak in early June.
.• Moody’s downgraded US debt from Aaa to Aa1 following Fitch and S&P, with credit default spreads reaching two-year highs amid fiscal concerns over the expanding deficit trajectory.
.• India emerges as the primary beneficiary of trade tensions, posting 7.4% GDP growth with manufacturing up 4.8% and record smartphone exports to the US rising 30.1% year-over-year.

• Over 70% of Americans expect worse business conditions in 12 months—the highest level since 2008.
• April saw extreme financial volatility with gold hitting record highs and the VIX spiking, though equity and bond markets partially rebounded after the Trump administration softened tariff rhetoric and affirmed Fed independence.
• A surge in Q1 imports (+41.3%) was driven by firms and consumers front-loading purchases, particularly autos, before tariffs, which will fully take effect July 8
• Real GDP contracted 0.3% in Q1 2025, with government spending falling and consumer spending slowing to +2.3%, signaling softening demand despite continued strong consumption in tariff-sensitive categories.

• Trump’s shifting tariff policies are creating market uncertainty, with inflation indicators rising and consumer confidence hitting a 12-year low
• The federal deficit has reached nearly $1.3 trillion for the first five fiscal months—approximately $500 billion more than last year
• OECD has downgraded global GDP growth projections to 3.1% in 2025 and 3.0% in 2026
• Germany has modified its debt brake to exempt defense spending and add €500 billion for infrastructure, aiming to increase defense spending to 3.5% of GDP by 2030
• China’s manufacturing PMI increased to 50.5 in March, with industrial output up 6.9% in early 2025 despite tariff concerns

• European equities outperformed the U.S., driven by defense stocks and a moderate recovery in industrial activity.
• The U.S. housing market hit a historic low, with the Pending Home Sales Index showing the weakest January in 25 years due to high mortgage rates (7.04%).
• The top 10% of earners now account for over 50% of total U.S. consumer spending, compared to 36% in the 1990s.
• The consumer savings rate reached a 6 month high, with lower-income groups rebuilding savings, leading to a downturn in consumer spending.
• Fund managers are increasingly worried about stagflation, and economic surprises have turned negative again in 2025.
• U.S. physical gold supply is tightening, causing leasing rates to spike and price spreads between London and U.S. gold markets to reach a five-year high.

• US stocks had a volatile start to the year, with the Fed keeping rates steady, new trade uncertainty, and disruptions in the tech industry.
• Trump announced new potential tariffs on Mexico, China and Canada, sending gold to new all time highs and routing crypto.
• China’s DeepSeek R1 AI model, reportedly trained for just $6 million, triggered a 3.5% drop in the NASDAQ and a 12.8% decline in NVIDIA (NVDA), while US regulators launched a probe into potential violations of semiconductor export controls.
• US economic data showed manufacturing optimism but slowing services due to continued inflationary pressures.
• The Baltic Dry Index (BDI) dropped 25% to a 23-month low, reflecting weaker industrial demand globally and shipping overcapacity.

• The U.S. faces a massive $2 trillion federal budget deficit, with limited room for cuts in key areas such as Social Security, Medicare, defense spending, and interest expenses.
• DOGE (Department of Government Efficiency) unlikely to make real progress.
• Despite the Federal Reserve’s rate cuts, long-term Treasury rates and mortgage rates have risen significantly, almost inversely.
• Long-term bonds are now riskier due to rising inflation and interest rates, leading to both declining bond prices and eroding purchasing power.
• Higher interest rates increase the discount rate for future earnings, potentially lowering stock valuations.
• If inflation persists and interest rates rise further, the Federal Reserve may reintroduce quantitative easing, which could accelerate inflation.
• Reduced global confidence in U.S. treasuries is leading some countries to pivot toward alternatives like gold and Bitcoin.