End of Quarter - Market Update

Markets

Markets for the second quarter were led by large cap growth stocks, such as NVDA, with the “magnificent 7” displaying an 37% year-to-date increase, where the rest of the S&P garnered only 9, when the top 7 were excluded.  As the global business cycle has been exhibiting stabilization trends, and inflation being slowly coming into the range of reasonable levels, we see a movement into monetary easing.

Global markets are still moving forward and are enjoying easier financial conditions, though the pace of these easing monetary policies remains unknown.  The money and capital markets still show preference for the near term, though inverted yield curves are returning to normal.

Economy

The U.S. expansion demonstrated both mid and late cycle characteristics and has muted the immediate risk of recession.  This is likely due to the advancement of AI technology.  Developing countries, like India, have shown an increase in mid-term characteristics.  Japan and Europe are in a solid late-cycle and Canada is showing risks of recession.

Globally, goods continue to experience moderate disinflation.  However, the inflated cost of housing has not abated, most likely due to the influx of people across our southern border.

Jobs creation, worker sentiment and wage increases slowed in the 2^nd quarter, showing a cool-down in the demand for labor.  The labor markets do tend to remain tight, however, and some key indicators are still near their pre-pandemic levels.

A big consideration is whether President Trump will continue the $4.5 trillion income tax cuts that expire at the end of 2025.  The deficit is expected to stay large.  Interest payments are expected to have a larger participation in the deficits over the next several years, putting pressure on the Fed to lower interest rates, or for the government to decrease its spending.  More than likely, the burden will be placed on the Fed, who is still fighting an inflation battle.