Policy

While we anticipate higher inflation in June, it looks increasingly likely that the price impact from tariffs will be less aggressive and long-lasting than many feared.

Bond market volatility will spike again in the near term. The Fed is committed to an easing cycle yet the Trump administration’s signature fiscal policy action will stimulate the economy. Tariffs are supposed to keep the budget deficit contained but they are inflationary. 

The US economy has held up better so far this year than we had expected. For the time being, investors should remain modestly underweight equities. A more aggressive underweight would be justified only once the “whites of the recession’s eyes” are visible.

Our Portfolio Allocation Summary for June 2025.

MacroQuant warns that US equities are pricing in very little economic risk. The model is shunning equities and recommends a large overweight to cash.

MacroQuant warns that US equities are pricing in very little economic risk. The model is shunning equities and recommends a large overweight to cash.

President Trump faces new restrictions on his trade powers coming from the US judicial branch, but they will not prevent him from continuing to restrict trade and investment with China. Rather, they will establish some curbs against entirely arbitrary executive tariffs, especially when wielded against US allies and partners.