At TM3 Wealth, it is important to us that you stay informed about the forces shaping today’s markets. Here’s what we believe deserves your attention this month. If you have any questions or would like to discuss these topics further, please reach out to your advisor.
The US economy is struggling to find its footing after months of changing consumer and corporate behaviors have begun to affect the economic data. As we saw in the negative Q1 GDP report, many purchasers rushed to build inventories and make purchases ahead of the tariffs1. With inflation driving prices up, both consumers and companies have reduced their spending2. However, jobs and wage growth have continued to be positive3,2, which indicates companies feel they can weather the storm until trade policy is finalized.
Equity markets gradually moved higher in the first couple of weeks of July despite new tariff threats from President Trump. Specifically, growth companies (such as the technology sector) have benefited from lower input costs and service-based solutions that skirt tariffs largely aimed at physical goods. As earnings season kicks off, investors are cautiously optimistic that companies can continue to drive higher profits and create clear forward guidance in the face of the unknowns.
Fixed Income has struggled in the first half of the month as soft economic data and the prospect of extended uncertainty around trade policy have pushed rates higher. In addition, the Fed continues to underscore its stance that fighting inflation is its primary focus, and with the latest 2.9% core inflation report4, the odds of near-term rate cuts grow slimmer5. Nevertheless, Chairman Powell’s recent comments still indicate two rate cuts this year, which would be a nice boost for bond investors.
The bottom line: We continue to see the next few months as pivotal for the economy. Although we do not have data to suggest a recession is imminent, consumers and companies need certainty to move forward. If not, we may see economic data slip even further, creating potential market volatility.
Sources:
- Bureau of Economic Analysis, https://www.bea.gov/news/2025/gross-domestic-product-1st-quarter-2025-third-estimate-gdp-industry-and-corporate-profits
- Bureau of Economic Analysis, https://www.bea.gov/news/2025/personal-income-and-outlays-may-2025
- Bureau of Labor Statistics, https://www.bls.gov/news.release/empsit.nr0.htm
- Bureau of Labor Statistics, https://www.bls.gov/news.release/cpi.nr0.htm
- CME Fed Watch Tool, https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html
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Gross domestic product (GDP) is the total monetary or market value of all the finished goods and services produced within a country’s borders in a specific time period. As a broad measure of overall domestic production, it functions as a comprehensive scorecard of a given country’s economic health.
The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
Real personal income is a measure of the total income received by individuals, adjusted for inflation to reflect changes in purchasing power. It includes wages, salaries, rental income, dividends, interest, and government benefits, excluding transfer payments like Social Security.
Nonfarm payrolls measure the total number of paid workers in the U.S., excluding farm employees, government employees, private household workers, and employees of nonprofit organizations.
The Bureau of Labor Statistics (BLS) is an agency of the United States Department of Labor. It is the principal fact-finding agency in the broad field of labor economics and statistics and serves as part of the U.S. Federal Statistical System. BLS collects, calculates, analyzes, and publishes data essential to the public, employers, researchers, and government organizations.
The Bureau of Economic Analysis (BEA) produces economic accounts statistics that enable government and business decision makers, researchers, and the American public to follow and understand the performance of the Nation’s economy.
