Outlook With so much geopolitical uncertainty, it helps to review some of the basic economic gauges. Both economic growth and inflation appear to exist at reasonable levels. The Atlanta Fed's real time economic growth model, GDPNow,1 showed shrinking growth in the 1st quarter due to a surge in import spending. Whereas now it shows a solid 2.4% growth. Year-over-year inflation metrics for consumer prices and producer prices are in the 2.3% and 2.4% levels respectively.2 We interpret this as a good sign that businesses are also likely experiencing reasonable growth. Of course, stocks can be richly valued or on sale. On that basis, we are a bit more cautious - especially considering household allocation to stocks appears to be at an all-time high.3 There are plenty of other economic metrics and valuation factors we study, and so it's fair to say our view is a bit more nuanced. Nevertheless, we remain cautiously optimistic about the stock and bond markets' potential for the remainder of the year. . . . The U.S. equity market finished down in the prior week driven by concerns over the U.S. budget deficit and rising debt. U.S. President Donald Trump’s policy decisions, specifically the “One Big Beautiful Bill Act” and new tariff developments were also in focus. The “One Big Beautiful Bill Act” is a budget reconciliation bill that combines a wide range of policy changes across taxation, social programs, defense, energy, and immigration. It primarily extends the tax cuts from the 2017 Tax Cuts and Jobs Act, increases the standard deduction and child tax credit temporarily, and creates new tax breaks for tips, overtime, and seniors. In order to cover the costs of the tax proposal, the bill introduces several ways to increase revenue, including a reduction in renewable energy incentives, a reduction in health and food aid programs, and new regulation on Medicaid work requirements. The bill also includes a provision to raise the U.S. debt ceiling by $4 trillion. Additional provisions are discussed across the 1,000 page document. Many of the tax cuts are front-loaded (2025 – 2028), while the spending cuts are backloaded. As it currently stands, the impact of these proposals on U.S. GDP are highly debated but estimates expect a modest increase in economic growth.4,5 The bill was passed by the House by one vote (final tally was 215-214) and now moves to the Senate for debate and revisions.6 Other developments in the markets include trade talks. After nearly two-weeks of calm water following the U.S. and China truce, Trump threatens a 50% levy on the European Union and a 25% levy on the iPhone-maker Apple (AAPL).7 Many of the initial tariffs have been paused, rather than removed. The 90-day pause is set to expire in July, while the lower-adjusted tariffs on China expire in August. For the week, the S&P 500 dipped -2.6%, while the blue-chip Dow and tech-heavy Nasdaq slid -2.5%, respectively. As for the fixed-income market, concerns over the implications of the bill on the U.S. fiscal deficit and worries of tariff impact on the economy sent Treasury yields lower. The drop in yield is likely to be short-lived since the market is now becoming conditioned to believe proposals will eventually be scaled back. | 
