Hope you’re all enjoying the heart of summer. It’s easy (and justified) to pay a bit less attention to markets during this time of year when fun and family take center stage. If you’ve tuned things out a bit, I have good news for you. Markets have been taking care of business! Let’s take a quick look at what’s been happening and what’s coming up this month.

All-time highs – equity markets have reached all time highs. This is VERY hard to believe after what we endured in April but here we are. After talk of tariffs was scaled back by the Administration and companies posted solid earnings in Q1 2025 despite the turmoil, markets rebounded as quickly as they fell. Ongoing optimism about US economic growth, lower inflation, and steady labor markets have helped propelled equity markets to new highs.

Tariff talk – after a welcome reprieve from tariff talk for over a month, talk of tariffs have returned this week. As an article I read this week said “after cycling through the five stages of grief, markets had largely accepted the idea of a base level of 10% tariffs.” However this week we learned that President Trump has sent letters to countries proposing higher levels (ranging from 25% for Japan, South Korea, Malaysia, and Kazakhstan, to 30% for South Africa, and 40% for both Laos and Myanmar). Trump has also been discussing tariffs on copper and pharmaceuticals. Markets did not react too badly to the news – likely due to the pattern of “shock announcements” and subsequent retreats. Deadlines were extended until August 1st so the topic is far from resolved.

Tax bill signed – President Trump’s “Big Beautiful Bill” is now law. Markets largely expected it to pass and as a result, impact was muted. Negotiations have been largely telegraphed and there weren’t major surprises in the final results – leading to minimal market reaction to the finalization.

Rate cuts (eventually) – Markets have resigned themselves to the fact that the Federal Reserve is unlikely to cut rates at its July meeting (virtually 0% probability priced in). Fed’s hesitation is largely driven by tariffs (which are back in the news – see above) and some slight weakness observed in the labor market. The FOMC minutes from June revealed consensus on holding rates steady, although there were some Fed members suggesting cutting as early as July and others waiting as long as next year. As always, if the data changes, the path of rates will also change.

Unreasonably calm? – This is perhaps one of the most hated/mistrusted rallies I have experienced. Even with markets taking out all time highs, there is an underlying mistrusts of what is occurring – mainly due to tariffs being largely unresolved. Markets are calm – credit spreads are very tight, the VIX is very low, and equity flows are increasing – and many believe markets are just being too complacent. Of course, risks remain from the tariffs but markets are factoring those risks in and concluding that based on past actions (reversals, delays, extensions, etc), the risk of a full blown trade war and the end of the American economy are minimal. Sure, any talk of new deals or new threats may lead to volatility but the overall probability of future dramatic threats are now greatly diminished compared to just three months ago. As one writer I followed smartly said this week…”At this point, it seems it would be irrational for markets to assume those things will happen, not for them to assume they will not”

All in all, markets and investors sit in a pretty nice position as we round the half-way point of 2025. As always, we suggest taking action (if it’s needed) while things are calm versus when things are volatile. So, if you find a quiet summer afternoon in your future, take the time to do some housekeeping (such as review your allocation, rebalance, safeguard needed cash, and reduce concentrations).

We are about to enter earnings season and expectations are once again rather high. As we always say, markets care more about “better or worse” than “good versus bad” – so earnings coming in ahead of expectations will be key to keep the momentum going. We’re confident but as always, anything can happen!

Here’s to a great July – both for markets but more importantly for your world in general.

Onward we go,