Hope you are all doing well. Stock markets made fresh all-time highs last week, with both the S&P 500 and technology-heavy Nasdaq up about 5% year-to-date. All three major U.S. stock indexes surged around 4% for the week as falling oil prices and easing trade tensions boosted investor sentiment. The Dow remains nearly 3% below its historic peak. If you have money in the stock market that you will be spending in the next 12 months, now is a good time to make some gains. Since the big, beautiful bill is and will be the focus of the news this week. I have broken down this week’s update using the lyrics of the School House Rock classic, I’m Just a Bill.
Yes, I’m only a bill.
And I’m sitting here on Capitol Hill.
Senate Republicans pushed President Donald Trump’s “big, beautiful bill” through an important procedural hurdle after hours of tense negotiations that put the bill’s fate into question. Nearly every Republican, except Sens. Thom Tillis, R-N.C., and Rand Paul, R-Ky, voted yes.
The bill will go through a “Vote-a-Rama,” when lawmakers can offer an unlimited number of amendments, to try and change as much as they can before final passage. Lawmakers will then move to a final vote to send the bill back to the House. The goal is to have it on the president’s desk by July 4. Of note, Federal employees can breathe a sigh of relief thanks to the Byrd rule. Senate Republicans stripped provisions aimed at overhauling the federal government’s pension program from their policy according to the new text of the bill. The proposals to raise federal employees’ required retirement contributions and charge unions for time spent engaging in organizing activities were among the provisions removed. Senate Parliamentarian Elizabeth MacDonough determined that several of the GOP’s civil service provisions violated the Byrd rule and would require 60 votes to pass.
But I know I’ll be a law someday
At least I hope and pray that I will
The markets continue to hope and pray for trade deals so that we don’t see another roller coaster like drop from tariffs. The July 9 deadline on reciprocal tariffs will soon be upon us. U.S. stock market volatility is now slightly below its year-end 2024 level and down sharply from its year-to-date high reached in early April. The Cboe Volatility Index (VIX) closed at 16.3 on Friday, below its year-end level of 17.4 and down from 52.3 on April 8. Investor sentiment has been lifted by updates from the Trump administration on negotiations with China and the European Union. As I have been saying for weeks, don’t get sucked into thinking we are done with tariffs. The administration has done a lot of sweet talking to the market. A lot of saying we’re close to deals and have the frameworks deals but no pen to paper on deals. Friday, we saw the beginning of what I had predicted would happen. The President terminated trade talks with Canada in a dispute over dairy product tariffs and a digital services tax. I genuinely believe that the tariffs will be going back on for several countries and once the President gets his bill passed and the debt ceiling gets raised, he will step up his rhetoric on trade.
And I’ll sit here and wait
While a few key Congressmen discuss and debate
The Federal Reserve is sitting and waiting while the impact of the big, beautiful bill and tariffs filters through the economy. The economic data we received this week could support the Fed cutting rates. Oil and energy prices have moved sharply lower in recent days as geopolitical tensions have eased somewhat. That helps support lower headline inflation. Inflation readings thus far that are in line or below expectations and remain contained. Last week’s personal consumption expenditure (PCE) inflation data for the month of May also helped affirm this trend. Headline PCE inflation was in line with expectations at 2.3% year-over-year, while core PCE inflation was a tick higher than forecasts at 2.7% but remains contained. The U.S. economy’s contraction in this year’s first quarter was deeper than initially estimated according to an updated figure released on Thursday. GDP contracted at a 0.5% annual rate versus an earlier estimate of a 0.2% contraction. A slower economy could lead to a weaker labor market which could also be an impetus to start cutting rates.
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