This is an important week for investors. Not only does the July meeting of the Federal Reserve Board take place on Tuesday and Wednesday, but 162 S&P 500 companies will report second quarter results this week, 44 of them on Wednesday July 30, including Microsoft Corp. (MSFT – $512.57) and Meta Platforms, Inc. (META – $700.00). In short, the Fed and earnings could make Wednesday a market moving day. Plus, there is the possibility that a US-China trade deal could be finalized, or at least penciled in, sooner than expected.

With the August 1^st tariff deadline quickly approaching, the cumbersome EU trade deal finally settled, and a China trade deal in “constructive” deliberation, the frenzy regarding tariffs and the economy should soon dissipate. If so, predictions that tariffs will generate both an inflation cycle and an economic recession should also quickly fade away. (Note: last week we reported that import prices were negative on a year-over-year basis in both May and June, debunking the tariff fears.) Second quarter earnings reports are also proving that analysts have been too fixated and pessimistic about the impact of tariffs on corporate profits. According to IBES LSEG estimates, 80% of the 197 S&P 500 companies that have reported second quarter results to date have beaten expectations. But with tariffs soon in the rear view mirror, investors may focus on what matters – earnings growth – and do not be surprised if pessimism shifts to optimism.

In the last two consecutive weeks, the S&P Dow Jones consensus earnings estimate for 2025 has increased $1.13 and $0.91, respectively, and it will be important to see how estimates change after this busy week of earnings results. At the present time the 2025 S&P 500 earnings estimate is $256.59 and the IBES LSEG consensus estimate is $264.51, up substantially in the last four weeks, but still below our long-held estimate of $270 for 2025. Our 2025 estimate remains unchanged; in fact, we would not be surprised if we proved to be too conservative. In short, we expect earnings surprises to continue in upcoming quarters.

Our reasoning is simple. Investors are yet to focus on the positive impact of the One Big Beautiful Bill, which in our view will stimulate an increase in capital expenditure this year. The ability of businesses to write off investment in structures, equipment, hardware, and software will be a bonus for entrepreneurs as well as many large industrial and technology companies. Overall, we believe the second half of the year should be much better than expected, not only from an economic perspective, but also from an earnings growth perspective.

While Wall Street professionals have been pessimists, the stock market has continued to rally, and this time it was retail investors in the lead. According to calculations by Goldman Sachs analysts, retail investor participation as a share of total S&P 500 flow reached 12.63% last week — the highest share since February and well above the average seen in recent years. Retail participation rarely exceeded 13%. Barclays equity strategists indicate that retail investors have poured more than $50 billion into global stocks over the last month and are the primary driver of the current rally. Conversely, institutional activity has been muted. Morgan Stanley’s latest survey of retail investors shows 62% of those polled are bullish on US equities and 66% expect the market will rise by the end of the quarter. These are both the highest percentages since the survey was launched two and a half years ago. In sum, economists, analysts, and many Wall Street strategists have been influenced by a negative mainstream media and not focused on what has been working well.

However, there are areas of the economy that are not doing well. Pharmaceuticals are under pressure from this administration, given President Trump’s determination to lower drug prices for consumers. Moreover, we expect healthcare insurer profits could be hurt by the administration’s policies of not providing illegals with healthcare insurance and the DOGE efforts to look for fraud and abuse in the Medicare and Medicaid systems. Plus, UnitedHealth Group Inc. (UNH – $261.07) in under investigation by the Department of Justice for antitrust violations. In short, there is a cloud over the healthcare system at the moment.

And the residential housing market continues to weaken. New home unit sales were 627,000 in June, up 0.6% for the month but down 6.6% YOY. Existing home sales were 3.94 million units, relatively flat for the month and also flat YOY. Inventories of both new homes and existing homes rose in June. New home inventories rose to 9.8 months, and existing home inventories rose nearly 18% YOY to 4.7 months. See page 3. Despite flat sales and rising inventories, existing single-family home prices rose in June. The median price was $435,300, up 2% YOY. On the other hand, new home prices continued to fall and in June the median price of a new single-family home was $401,800, down nearly 3% YOY. Both median and average prices of newly built homes have been relatively range-bound since early 2021. The median price of an existing single-family home rose 2% YOY in June to $435,300. See page 4.

Homeownership rates have been falling since the June 2020 pandemic high of 67.9% when all regions and all age groups simultaneously hit cyclical high levels. (Note: record homeownership levels were recorded at higher levels in 2004.) Homeownership rates eased in the second quarter from 65.1% to 65.0%, but most of the weakness was seen in the South, where homeownership fell from 67.1% to 66.6%. In terms of age groups, only those 35 to 44 years old had an increase in ownership, all other age groups experienced declines, the greatest of which was the 45 to 54 age group, where homeownership fell from 70.6% to 69.2%. See page 5. Fewer people can afford homes in the current environment, so it is not surprising that home sales are declining, and homeownership is falling. A simple measure of median existing home prices to median income shows that the residential market has been “expensive” since early 2020. However, at the end of 2020, the effective rate on a 30-year mortgage was 2.7% and in May 2025 (last NAR available update) it was substantially higher at 6.9%. This jump in interest rates makes homeownership unreachable for many. Not surprisingly, the NAHB single-family housing index was 33 in July, up from 32 in June, but down from 47 in January. Traffic of prospective buyers fell to 20, the lowest level since December 2022. See page 6.

New residential construction is weakening and in June single-family permits fell 8.4% YOY and new single-family housing starts declined 10% YOY. Multi-family housing has been more stable, but multi-family inventory is rising, and this sector could also slow in the near future. In sum, housing has been a weak spot in an otherwise stable and growing economy. Therefore, it is not surprising that President Trump, a real estate mogul, would like interest rates to be lower. However, the FOMC does not control the long end of the curve and there is no way to predict what will happen to longer-term rates if the Fed cuts the fed funds rate. See page 7. We do not expect a change at the current Fed meeting, but we do expect that there will be dissenters who will vote for lower rates. This could be the foundation for a rate cut in September. Technical indicators remain bullish, but neither the 25-day volume up/down oscillator nor the NYSE cumulative advance/decline line have made new highs in the recent week. Both need to confirm the new highs in the S&P 500 and the Nasdaq Composite if the rally is to continue. All in all, the remaining earnings releases will be significant, because positive surprises are needed to sustain the advance.

Gail Dudack

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To the best of our knowledge, no economist has written about import prices recently, or the fact that they were negative on a year-over-year basis in both May and June. Import prices excluding petroleum products rose 1.3% YOY in June, but this was down from 1.5% in May, and down from the December 2024 level of 2.3% YOY. Also noteworthy is the fact that US export prices rose to 2.8% YOY in June, up from 1.9% YOY in May. In other words, imports to the US have shown no sign of inflation pressure due to President Trump’s tariffs, conversely, US export prices are rising. Keep in mind that the 10% universal tariff, a 25% tariff on foreign-made cars, tariffs as high as 145% on some Chinese goods, and a 25% tariff on steel and aluminum have been in place since April. In other words, if an investor did not read a newspaper since March, they would not know that there was a new tariff policy imposed by this administration.

Nevertheless, economists, though less negative than they were in April, continue to fear that tariffs will trigger both inflation and an economic slump in the US. Trained economists should know that tariffs do not have a direct impact on consumer prices for a variety of reasons such as: foreign suppliers can absorb part, or all of the tariff, transportation costs could be falling due to the decline in energy prices and absorb all or part of the tariff, retailers could absorb part of the tariff expense through lower margins, or tariffs can be offset by a change in the currency.

However, in 2025 the weakness seen in the dollar is not helping consumers; in fact, it makes imports more expensive. On the other hand, it is helping many large multi-national companies. The dollar is down roughly 10% this year, due in large part to media-driven confusion regarding tariffs, worries about growth, and ballooning government debt. And companies indicating there was a positive impact on recent earnings due to a weaker dollar include Levi Strauss & Co. (LEVI – $20.95), Netflix, Inc. (NFLX – $1190.08), PepsiCo Inc. (PEP – $146.04), 3M Company (MMM – $151.20), BlackRock, Inc. (BLK – 1100.39), Bank of NY Mellon (BK – $98.90), and Coca-Cola Company (KO – 69.66). PepsiCo, with about 40% of total net revenue from outside the US, forecasted a smaller annual profit drop, helped by a weaker dollar. Coca-Cola said annual comparable earnings per share are expected to be near the top end of its target of a 2% to 3% rise, helped by a softer greenback.

According to LSEG research, based on two decades of data, approximately 38% of total S&P 500 revenue is derived from international markets and LSEG estimates that every 1% depreciation in the dollar historically improves S&P 500 earnings per share growth by about 0.6 percentage points. In short, the weakness in the dollar could boost earnings 6%. Of the eleven S&P 500 sectors, technology, consumer discretionary, healthcare, and industrial companies have the highest international exposure.

Still, not all multinationals had good news. General Motors (GM – $48.89) indicated that second-quarter core profit slid 32% as tariffs took a $1.1-billion bite from its bottom line. And a number of defense stocks noted that the weak greenback hurt earnings. Nevertheless, the S&P Dow Jones consensus earnings estimate for calendar 2025 was $255.68, up $1.13, this week and the forecast for 2026 was $297.31, up $1.91. We expect earnings will continue to surprise to the upside. See page 9.

Headline CPI showed prices rising 2.7% YOY in June versus 2.4% YOY in May and core CPI rose 2.9% YOY versus 2.8% YOY in May. However, as we pointed out last week, most of the increases in pricing came from services such as household insurance, up 4.9% YOY, motor vehicle insurance, up 6.1% YOY, and household energy services, up 7.6% YOY. Energy commodity and gasoline prices were down in June, but these declines have not filtered down to the energy service sector. See page 3.

The PCE deflator rose 2.3% YOY in May versus 2.2% in April. But note that all of these rates are below the long-term CPI average of 3.5% YOY. PPI indices are interesting because they reflect the underlying cost of goods and services. For example, back in early 2022, final demand PPI peaked at 11.6% YOY and PPI finished goods peaked at 18.3% YOY, in step with the CPI peaking at 9.1% YOY in June. However, in June 2025 final demand PPI fell from 2.8% YOY to 2.4% YOY. PPI for finished goods, which does not include services such as transporting goods to a retail outlet, was 1.9% YOY, up from 1.3% YOY in May. In short, both indices have been trending lower from their January levels, i.e., 3.8% and 3.1%, respectively. Plus, all PPI indices are well below their long-term average of 3% YOY. See page 4.

The price of crude oil is one of the best, if not the best, lead indicator of inflation and it leads both the PPI and CPI indices. It is therefore important to note that crude oil prices have been, and remain, negative on a year-over-year basis. This is the most favorable aspect of the 2025 economic backdrop in our view, and it ranks second only to the decline in import prices. See page 5.

One could theorize that tariffs will not be felt by consumers until August 1st, when the bulk of President Trump’s new tariffs take effect; however, we believe that the impact will be muted at that time and short-lived. Even the University of Florida consumer sentiment indices showed that inflation expectations fell from 5% in June to 4.4% in July (the lowest since February). And we expect this index will fall further. Given this backdrop it is curious that the Fed lowered rates by 50 basis points in September and 25 basis points in both November and December but has been on a long pause ever since. See page 6.

University of Michigan’s consumer sentiment survey was 61.8 in July, up from 60.7. Present conditions rose to 66.8, up from 64.8 and the expectations index was 58.6, up from 58.1. However, we no longer use sentiment indicators in our analysis due to the political bias embedded in the data. For example, the University of Michigan headline index was 61.8 in July, but for Democrats it was 41.9 down from 42.3 in June. The index for independents was 60.5, up from 55.6. For Republicans, the headline index was 98.2, up from 94.4. In short, sentiment data is biased based upon political party; and while trends for both parties had moved in the same direction in the recent past, in 2025 the trends in sentiment have been completely divergent. See page 7. In short, sentiment data can be misleading. Technical indicators improved in recent days. The 25-day up/down volume oscillator is at 2.71, up nicely from a week ago though still shy of an overbought reading. There was a one-day overbought reading of 3.15 on July 3 and the oscillator was overbought for 9 of 11 days in May. This predicted new highs in the indices. At the moment, this indicator has not – yet — confirmed the new highs seen in the S&P 500 and Nasdaq Composite this week. However, the 10-day average of daily new highs is bullish at 281 and new lows are modest at 51. New highs of 100 or more are consistent with new highs in the indices. Last but far from least, the NYSE cumulative advance/decline line made a new high on July 22, 2025 confirming the string of new highs seen in the averages. Overall, the technical scorecard is solidly bullish. The only negative for the equity market is that it is currently trading at a PE of 23.4 times our estimate of $270 for this year. This is rich and requires additional good earnings results.

Gail Dudack

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Many of today’s news headlines regarding the June CPI release are surprising to us as well as disappointing. Bloomberg News ran the following headline: “Tariffs Finally Bite” and wrote “As overall prices rose 2.7% in June from a year earlier, appliances jumped the most in nearly five years, toys increased at the fastest pace since early 2021 while household furnishings and sports equipment climbed by the most since 2022.” However, the actual data from the Bureau of Labor Statistics shows that prices for appliances rose 0.84% YOY in June, up from negative 0.77% YOY in May. This is a big switch from negative pricing to positive pricing, but clearly not inflationary. Prices for toys rose 0.8% YOY versus 0.2% YOY in May. Household furnishings rose 1.7% YOY versus 0.6% YOY in May and sports equipment prices actually fell 0.5% YOY after falling 2.8% YOY in May. In short, the real data does not fit the headline.

To be statistically rigorous, our analysis uses not-seasonally-adjusted prices on a year-over-year basis. This methodology automatically adjusts for seasonality, reflects actual price changes, and is closest to the actual experience of consumers. Our analysis does not show a significant acceleration in pricing, moreover, it widely differs from the Bloomberg article. We assume the Bloomberg writer was referring to month-over-month seasonally adjusted pricing, because it made for a more dramatic headline, even if it is misleading.

Equally important, the categories mentioned in the article have a small weight in the CPI. The largest of the four mentioned is household furnishings (a category that includes appliances) and is 3.36% of the index. Toys have a 0.288 weighting and sports equipment is 0.219. In short, the impact of these segments is limited, and the lack of analysis is disingenuous.

However, Bloomberg News should not be singled out because Reuters was equally bad with a headline of “US consumer prices rise in June as tariff pass-through begins.” ‘The Wall Street Journal carried a headline noting “Inflation Picks Up to 2.7% as Tariffs Start to Seep Into Prices.” To its credit, The Wall Street Journal also wrote an article about the reliability of price data stating “To calculate the inflation rate, stats workers check stores and online retailers to see how prices are changing month to month. When that isn’t possible, they estimate.” “The BLS used different-cell imputation 35% of the time when estimating missing prices, up from 30% a month earlier and well above the level of around 10% that was typical before the staffing challenges began.”

Unfortunately, this article is also misleading. The composition and reliability of CPI and PPI data is something I understand relatively well after serving as a member of the Department of Labor’s Business Research Advisory Council (BRAC) for consumer and producer price indices from 1985 to 1990. This committee meets with the BLS program staff approximately two times a year to explore areas of concern or interest. At the time that I served on the committee, the BLS was upgrading its system from wholesale prices to producer prices and adding more technology to their methodology. It was also very clear that stats workers estimated many prices on a monthly basis, and estimates were closer to 30% to 40% of all items per month than the 10% mentioned above. There are thousands of items that are priced every month and not all of them have regular monthly pricing and many need to be estimated. There may be more estimates today due to staff cuts, but I found the staff at the BLS to be conscientious and knowledgeable about their work to be as rigorous as possible. Moreover, there is a regular updating of prior months which were originally estimated, which is why the BLS is constantly revising historical data. Overall, the system is probably better today than it was when I served on the Council since technology has advanced dramatically and makes the gathering of prices far easier and more accurate.

Here is what we found in the June CPI report. Headline CPI showed prices rose 2.7% YOY, up from 2.4% YOY in May. Core CPI rose 2.9% YOY, up from 2.8% YOY. Food & beverage prices rose to 2.9% YOY, up from 2.8% in May, and 2.2% YOY a year ago. Owners’ equivalent rent of residences was 4.2% YOY, unchanged from May, but down from 5.5% YOY a year ago. The broad energy sector showed prices fell 0.8% YOY, but household energy prices (a 3.32% weight) rose to 7.1% YOY and energy services jumped 7.6% YOY. In short, lower energy prices are not reaching households and this contributed significantly to the rise in the CPI. On the other hand, motor fuel and gasoline both fell 8.2% YOY in the month. See page 3.

The main components of the CPI do not show a resurgence in inflation; however, the deceleration seen in recent months appears to have stalled. Housing remains a major component of the CPI and while owners’ equivalent rent of residence continues to trend lower, other segments such as tenants’ and household insurance is up 4.85% YOY, fuels & utilities rose 6.7% YOY, water, sewer, and trash collection rose 5.4% YOY, household furnishings and operations rose 3.3% YOY. (This is a different category from household furnishings and operations is where prices increased.) Separately, motor vehicle insurance rose 6.1% YOY (but down from 7% in May) and motor vehicle maintenance and repair services were up 0.1% to 5.2% YOY. Our analysis of the CPI report showed that inflation was not in imported goods, or even in goods, it was in services such as insurance, repair services, and utilities. See page 4.

In our opinion, President Trump should refrain from making negative comments about Fed Chair Jerome Powell, however, the data partially explains his frustration. With headline inflation currently at 2.7% YOY and the effective fed funds rate at 4.33%, the real fed funds rate is currently at 1.625% and is above the long-term average of 1%. In other words, there is, and has been, room for the Fed to ease interest rates by at least 50 basis points this year. See page 5. Other developed countries have been lowering their rates for the last twelve months. Perhaps the Fed “expects” inflation to rise to 3.2% YOY or higher, but if so, this means the FOMC policy has not been data driven. Actual data shows tariffs have not been inflationary; in fact, as noted, recent inflation has been in services, not goods. Note that import and export prices for June will be reported later this week.

June’s Treasury report revealed a monthly surplus of $27 billion, the second surplus since the $258.4 billion reported in April 2025. However, June was helped by the fact that June 1, 2025 fell on a weekend, and as a result, June’s government payments of Social Security, Veteran’s benefits, etc. were paid at the end of May. Still, the big story in terms of fiscal deficits is that deficits have remained high over the last four years. Typically, deficit spending accelerates during a recession and a 12-month sum of deficits returns to 2% to 3% of GDP during the subsequent expansion. This did not take place during the Biden administration and deficit spending continued at a pace of 6% to 9% of GDP. This stimulus added significantly to federal debt and contributed to inflation during the 2021-2022 period. See page 6.

The other change that took place during the last two administrations was the expansion of debt issued in Treasury bills. At the end of 2016, only 9% of federal debt was funded by Treasury bills and short-term rates were 0.6%. Treasury bills rose to 22% of federal debt by June 2020 as the pandemic deepened, but rates were extremely low at 0.125%. However, by the end of the 2024 fiscal year (September), Treasury bills represented 18.75% of federal debt and Treasury bill rates were 4.52%. As a result, from the end of 2020 to the end of 2024, interest payments on federal debt rose 155% from $345.5 billion to $881.7 billion, or from 5.3% of total government outlays to 13.1% of total outlays. See page 7. This is a massive burden on both the federal deficit and the debt markets. As a businessman as well as President, Donald Trump wants to lower deficits as well as the interest payments on the debt.

Technical indicators remain positive. The 25-day up/down volume oscillator is at 1.61 this week, neutral and down from a recent one-day overbought reading of 3.15 on July 3. However, this one-day overbought reading followed and overbought reading for 9 of eleven days in May during which it reached a high of 5.10 on May 16. The 5.10 reading was the highest overbought reading since August 18, 2022 which appeared shortly after the market rebounded from its June 16, 2022 low. This was very positive performance, confirms that strong demand is driving prices higher, and is a characteristic of a bull market cycle. We remain bullish for the second half of the year.

Gail Dudack

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Our optimism for the stock market in the second half of the year has been predicated upon the passage of the One Big Beautiful Bill (OBBB) by Congress; and in our view its signing on July 4, 2025 sets the stage for a stronger economy in coming months and quarters. The alternative would have resulted in the largest middle class tax increase in history, and it is quite possible that failure to pass the OBBB would have triggered a recession in 2026.

The positives in the OBBB are that for individuals it makes permanent most of the tax cuts and lower marginal rates in the 2017 tax bill which would have expired at the end of this year without congressional action. It also boosts the standard deduction by $750 ($1500 for couples), increases the federal child tax credit from $2000 to $2200 and creates new “Trump accounts” for children into which the government can make a $1000 contribution per child. It also includes deductions on tips, overtime and car loan interest payments as well as a temporary $6000 deduction for adults 65 and older who earn no more than $75,000 a year. Note that none of these provisions fund government-run programs (much like the 2022 Inflation Reduction Act or the Infrastructure Investment and Jobs Act) but put money directly into the hands of waiters, Uber drivers, seniors and middle-class US households. As a result, we expect it will be a direct boost in consumption and GDP.

However, business-related tax cuts could prove to have the biggest impact on the economy. The OBBB extends numerous business-related tax cuts from the 2017 bill and also permanently extends Section 168 first-year bonus depreciation deduction. Very simply, this provision allows businesses to deduct a significant amount of the cost of property in the first year it is placed into service, rather than depreciating it over several years. Eligible property includes computer systems, software, vehicles, machinery, equipment, and office furniture. Qualified improvement property (QIP), or improvements to existing nonresidential buildings, also qualify. The bill allows taxpayers to immediately deduct domestic research or experimental expenditures paid or incurred in tax years beginning in 2025. This does not apply to research outside of the US. In short, the OBBB inspires domestic capital investment and research and it is retroactive to January. Since the bill gives immediate tax relief to domestic corporations expanding their businesses, it should have a direct and quick impact on capex. 

Among other things, the OBBB also includes $12.52 billion in federal spending for Air Traffic Control modernization, funding for the Golden Dome missile defense system, $46 billion for construction of the US-Mexico border wall, $45 billion to expand detention capacity for immigrants whose removal is pending and $5 billion for Customs and Border Protection facilities. These provisions should be stimulative to the technology and industrial sectors while also producing good-paying jobs. 

The negative to the OBBB is that it does not go far enough, according to some, in cutting spending and the deficit. It does focus on eliminating waste, fraud, and abuse in Medicaid and blocks illegal immigrants from receiving Medicaid. However, as a businessman familiar with debt funding, we believe President Trump’s goal is to simultaneously trim the deficit while growing the economy. If the administration is successful, the deficit-to-GDP ratio will fall from the currently unsustainable level of nearly 7% of GDP to the pre-COVID level of 3% to 4% of GDP, i.e., at the rate of economic growth.

Meanwhile, the overall economy appears to be stable, although surveys show that uncertainty is negatively impacting areas of the economy. The June employment report showed an increase of 147,000 jobs in the month and positive revisions for previous months that added an additional 16,000 jobs. The rate of increase in job holders was 1.15% YOY in the establishment survey and 1.4% YOY in the household survey. Both rates are slightly below the long-term average but more importantly, indicate a stable and growing job market. Job gains were largest in state and local government and in healthcare; meanwhile, federal employment continued to decline. The unemployment rate fell from 4.2% to 4.1%, as a result of an increase in those employed and a decline in the number of unemployed in the household survey. There was no significant change in the participation rate or the employment-population ratio. See page 3.

Average hourly earnings rose 3.7% YOY in June and average weekly hours fell by 0.1 to 34.2. Average weekly earnings for private workers rose 3.4% YOY and for production and nonsupervisory workers earnings rose 3.3% YOY. Both of these gains exceeded the inflation rate of 2.4% and represented an increase in real weekly earnings. In June, the number of discouraged workers rose sharply from 352,000 to 654,000 — the highest monthly figure since December 2020. This increase corresponded with a rise in the number of individuals leaving the workforce which could be related to immigration policy or that illegals fear deportation when reporting to work. See page 4. In the long run, a tightening in the labor market could become a real inflationary factor, not tariffs.

Both ISM manufacturing and nonmanufacturing indices rose in the month of June. Manufacturing rose from 48.5 to 49.0, however this still remains below the breakeven level of 50 which defines contraction versus expansion. The nonmanufacturing index rose from 49.9 to 50.8, which was back to expansion mode after a brief dip below 50. In both indices production and business activity were higher in the month. See page 5. The worrisome factors in the ISM reports were related to prices paid which remain elevated in both indices at 69.7 in manufacturing and 67.5 in nonmanufacturing. Employment was also a concern, falling from 46.8 to 45.0 in manufacturing and from 50.7 to 47.2 in nonmanufacturing. However, note that the employment trends in both ISM indices have been decelerating for the last three years. Surveys have been significantly weaker than hard data and may not be reliable. See page 6.

The Small Business Optimism Index declined 0.2 in June to 98.6, slightly above the 51-year average of 98. Of the 10 components, four increased, four decreased, and two were unchanged. Inventory satisfaction contributed the most to the decline in the Index. The Uncertainty Index decreased by 5 points from May to 89. Thirty-six percent of all owners reported job openings they could not fill, up 2 points from May. Thirty percent had openings for skilled workers (unchanged), and 13 percent had openings for unskilled labor (unchanged for the fifth consecutive month). The difficulty in filling open positions is particularly acute in the construction, manufacturing, and transportation industries. See page 7.

US light-vehicle sales declined for a second consecutive month in June — the first back-to-back monthly declines since mid-2023. The earlier surge in sales — the highest levels in over four years — was driven by accelerated purchases in anticipation of prospective tariffs. Seasonally adjusted annualized sales (SAAR) registered 15.3 million units, a 1.7% decline from May but a 2.3% increase from the prior year. The US auto industry faces tariff uncertainty but also elevated vehicle prices and financing costs. But note that the One Big Beautiful Bill allows for a tax deduction on Made in America auto loan interest and this should help the domestic auto market. See page 8. The technical condition of the equity market continues to be very favorable with the NYSE cumulative advance/decline line hitting a new high on July 3, 2025, daily new highs averaging 500 per day, and our 25-day up/down volume oscillator predicting a new high in the averages in the middle of May. See page 11 and 12. The only negative in the current environment is valuation with the forward PE currently at 21.1 times, well above the long-term average of 17 times. However, we expect earnings will surprise to the upside in the second half of the year and support the rally. We remain bullish.

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