Tariffs

Inflation expectations in the US remain reasonably well anchored and there are few signs of a brewing wage-price spiral. Thus, the near-term risks to growth outweigh the risks of higher inflation. Looking beyond the next year or two, however, we are worried about stagflation.

Our Portfolio Allocation Summary for September 2025.

The cost of tariffs is falling on the US consumer, not foreign exporters or US firms.

This morning’s CPI report marginally tips the scales in favor of a September rate cut.

Data received since we began reassessing our bearish stance supported our notion that the economy is not as strong as the investor consensus perceives. But the softness will likely have to intensify in July and August to preserve our defensive recommendations.

The Q2 earnings season delivered solid earnings and sales growth and resilient margins, reassuring investors that corporate America remains in good health and is capable of navigating economic uncertainty while mitigating the impact of new trade levies. The outlook is generally positive, but with one important caveat: The full effect of tariffs has yet to materialize.

US tariffs will not derail the low-inflation economic recovery underway in the Euro Area. Investors should overweight European equities, focusing on parts of the market more insulated from tariffs.