The Markets

U.S. companies have been hitting it out of the park!

Earnings season happens four times every year. It’s the period of time when publicly traded companies report how they performed during the previous quarter. So far, in aggregate, the companies in the Standard & Poor’s (S&P) 500 Index have delivered solid results for the second quarter of 2025.

“Overall, 66 [percent] of the companies in the S&P 500 have reported actual results for Q2 2025 to date. Of these companies, 82 [percent] have reported actual EPS [earnings per share] above estimates, which is above the 5-year average of 78 [percent] and above the 10-year average of 75 [percent]. If 82 [percent] is the final number for the quarter, it will mark the largest percentage of S&P 500 companies reporting a positive EPS surprise for a quarter since Q3 2021 (also 82 [percent]),” reported John Butters of FactSet.

While many U.S. companies had an excellent second quarter, economic clouds are shadowing investor optimism.

“Investors are struggling with a contradiction at the heart of the market as stocks move into their toughest months of the year. On the one hand, earnings have been strong. On the other, economic data are showing signs of weakness. How the two variables play out could determine whether the stock market can keep rallying to new highs—or stumbles into an end-of-summer selloff,” explained Martin Baccardax of Barron’s.

Recent economic data show a softening labor market and weaker consumer spending. (Consumer spending is the primary driver of U.S. economic growth.) In addition, activity in the manufacturing and service sectors slowed. Nazmul Ahasan of Bloomberg reported:

“The Institute for Supply Management’s index of services declined last month to 50.1, below all estimates in a Bloomberg survey of economists. Readings above 50 indicate expansion…The data, released Tuesday, paint a picture of a sluggish service economy wrestling with the fallout of higher tariffs, cautious consumers and [policy] uncertainty…The services sector is by far the largest in the U.S. economy, and has helped drive growth this year while the manufacturing industry contracted for five straight months.”

Last week, the major U.S. stock indexes rallied. The Nasdaq Composite Index closed at a record high, while the Standard & Poor’s 500 Index and Dow Jones Industrial Indexes finished the week close to new highs, reported Amalya Dubrovsky , Brett LoGiurato  and Laura Bratton of Yahoo! Finance. U.S. Treasury yields generally moved higher. The 30-year Treasury bond yielding 4.85% at the end of last week.

BURGERNOMICS: A LOOK AT THE BIG MAC INDEX. During the first six months of 2025, the United States dollar delivered its worst performance since 1991. “The U.S. Dollar Index, which measures the value of the greenback against the world’s six most traded currencies, has lost almost 11 [percent] of its value…,” reported Valerio Baselli of Morningstar.

The drop in the U.S. dollar’s value hasn’t made as big a difference as some might have expected – at least when it comes to buying burgers abroad.

Since 1986, The Economist has been using the “Big Mac Index” as a lighthearted way to measure the relative value of currencies across the world. In theory, if currency exchange rates are properly aligned, a burger should cost the same no matter where it is purchased. (This is known as purchasing-power parity.) That’s rarely the case, so the index helps identify which countries’ currencies are overvalued or undervalued.

“Purchasing-power parity suggests that, with a Taiwanese Big Mac costing 78 Taiwanese dollars and an American one $6.01, the currencies’ exchange rate should be the ratio of the two prices. Hence $1 should buy NT$13 [new Taiwan dollars]. In reality, it buys NT$29. The Big Mac index therefore concludes that the Taiwanese dollar is greatly undervalued against the greenback, by some 56 [percent],” explained The Economist.

In July 2025, The Economist updated the Index, comparing the price of a burger in the U.S. to the price overseas. (The price of a burger in the United States rose from $5.79 in January to $6.01 in July.) After the decline in the U.S. dollar, currencies in many Asian countries remained significantly undervalued relative to the dollar. For example, a burger costs:

• 49.8 percent less in Hong Kong than it does in the United States.
• 41.2 percent less in Japan than it does in the United States.
• 41.1 percent less in Indonesia than it does in the United States.
• 38.5 percent less in India than it does in the United States.

In contrast, a burger costs:

• 54.7 percent more in Switzerland than it does in the United States.
• 39.0 percent more in Sweden than it does in the United States.
• 36.1 percent more in the Euro than it does in the United States.
• 31.1 percent more in Britain than it does in the United States.

Overall, European countries have seen their currencies become more expensive when compared to the U.S. dollar, while currencies in China, Japan, Singapore, South Korea, Taiwan and Vietnam remain undervalued relative to the U.S. dollar. “Most are now even cheaper,” according to The Economist.

WEEKLY FOCUS – THINK ABOUT IT
“Every individual… neither intends to promote the public interest, nor knows how much he is promoting it… he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.”
― Adam Smith, Philosopher and economist

Sources:

https://insight.factset.com/sp-500-earnings-season-update-august-1-2025

https://www.barrons.com/articles/stock-market-earnings-data-buy-sell-f3743245?mod=hp_LEDE_C_3 or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/08-11-25-The-Stock-Market-Is-Stuck%20-%202.pdf

https://abcnews.go.com/Business/us-headed-recession-experts-weigh/story?id=124407347

https://www.bloomberg.com/news/articles/2025-08-01/us-manufacturing-contracts-at-fastest-pace-in-nine-months or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/08-11-25-US-Manufacturing-Contracts%20-%204.pdf

https://www.bloomberg.com/news/articles/2025-08-05/us-service-activity-nearly-stagnates-as-employment-contracts or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/08-11-25-US-Service-Activity%20-%205.pdf

https://finance.yahoo.com/news/live/stock-market-today-nasdaq-hits-fresh-record-sp-500-dow-rise-as-wall-street-closes-winning-week-on-high-note-200211215.html

https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve&field_tdr_date_value=2025

https://global.morningstar.com/en-gb/markets/how-low-can-us-dollar-go

https://www.economist.com/interactive/big-mac-index or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/08-11-25-Our-Big-Mac-Index-Shows-How-Burger%20-%209.pdf

https://www.economist.com/finance-and-economics/2025/07/16/our-big-mac-index-will-sadden-americas-burger-lovers or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/08-11-25-Our-Big-Mac-Index-Will-Sadden%20-%2010.pdf

https://www.adamsmith.org/adam-smith-quotes

The Markets

This is not the inflation you’re looking for…

In general, everyone who buys goods or services in the United States would prefer to see prices trend lower – and that’s what happened in the earlier part of this year. Over the last couple of months, though, inflation has begun to creep higher.

Last week, the Consumer Price Index (CPI), a well-known measure of inflation, showed prices moving higher in June. The only goods that did not show price increases in June were new and used vehicles. “Even with only limited signs of increasing effects from tariffs, inflation is once again accelerating in America. The total measure of inflation in June was right in line with expectations on Tuesday, but it was still a significant jump in the wrong direction,” reported Megan Leonhardt of Barron’s.

Here’s a look at how prices have changed this year.

The CPI provides two inflation measures: headline inflation, which shows how all prices changed, and core inflation, which excludes volatile food and energy categories.

Gathering the data for the CPI requires boots on the ground. “Prices are collected each month in 75 urban areas across the country from about 6,000 housing units and approximately 23,000 retail establishments—department stores, supermarkets, hospitals, gas stations, and other types of stores and service establishments,” reported the Bureau of Labor Statistics.

Recently, staff reductions have made it more challenging for the government to complete the monthly inflation survey, reported Matt Grossman of The Wall Street Journal. When hard data is not collected, the staff relies on estimates. In the past, about 10 percent of CPI survey data was estimated, according to economist Torsten Sløk. In May, that number rose to 30 percent – almost one-third of the data in the survey.

Last week, earnings season got off to a good start. John Butters of FactSet anticipates that the Standard & Poor’s 500 Index will report “year-over-year growth in earnings above 9 [percent] for the second quarter.” Strong earnings boosted investor confidence. The Standard & Poor’s 500 Index rose over the week, and the Nasdaq Composite finished at a new record high. However, the Dow Jones Industrial Average ended slightly lower. Yields on shorter maturities of U.S. Treasuries generally moved lower over the week, while yields on longer maturities of U.S. Treasuries moved higher.

ABOUT MONEY AND HAPPINESS…In 2010, Nobel Laureates Daniel Kahneman and Sir Angus Deaton investigated how money influences happiness. They measured as people’s daily sense of emotional well-being and their lifetime sense of accomplishment as proxies for happiness. The pair concluded that, “More money does not necessarily buy more happiness, but less money is associated with emotional pain.” In addition, the emotional benefits of earning more money leveled off when income reached $75,000. (The real median income in the United States was about $66,700 in 2010, according to the U.S. Census Bureau via FRED.)

In 2021, the relationship between money and happiness was revisited by Matthew Killingsworth, a senior fellow at the Wharton School. The study found, “Larger incomes were robustly associated with both greater experienced well-being and greater evaluative well-being…There was no observed plateau in experienced well-being…either around $75,000/y or at any other income level.” (The real median household income in the U.S. was about $79,200 in 2021, according to the U.S. Census Bureau via FRED.)

To try and understand the contradiction in findings, Kahneman and Killingsworth engaged in an adversarial collaboration mediated by Wharton professor Barbara Mellers. After reviewing the data sets, they concluded, “In the low range of incomes, unhappy people gain more from increased income than happier people do. In other words, the bottom of the happiness distribution rises much faster than the top in that range of incomes. The trend is reversed for higher incomes, where very happy people gain much more from increased income than unhappy people do.”

WEEKLY FOCUS – THINK ABOUT IT
“Research is formalized curiosity. It is poking and prying with a purpose.”
― Zora Neale Hurston, Writer and anthropologist

Have Financial Markets Grown Overly Complacent?

The classic fable of “The Boy Who Cried Wolf” serves as a cautionary tale: repeated false alarms can lead to dangerous complacency. Some observers of financial markets fear that investors are exhibiting a similar lack of vigilance. As noted by Isabelle Lee and Denitsa Tsekova of Bloomberg, “Wall Street’s tolerance for shock is becoming heroic.” They highlight a series of recent anxieties—inflation concerns, tariff-induced downturns, and conflict in the Middle East—suggesting that it’s “hard to imagine what could still rattle the investor class.”

Following a tariff-related market dip in April, investors have steadily propelled U.S. stock values upward. According to Paul R. LaMonica of Barron’s, this upward trend has been fueled by a focus on positive economic indicators, robust corporate earnings, and the perceived potential of artificial intelligence.

Despite persistent uncertainties surrounding tariffs, increasing national deficit and debt levels, and ongoing geopolitical conflicts, both the Standard & Poor’s (S&P) 500 and Nasdaq Composite Indexes reached record closing highs last Thursday. The Dow Jones Industrial Average (Dow) was also approaching its first new high since December 2024, as reported by Connor Smith of Barron’s.

However, this seemingly unwavering investor confidence experienced a sudden tremor last Friday.

THE BIG BEAUTIFUL BILL IS NOW THE LAW OF THE LAND. President Trump signed the One Big Beautiful Bill Act (OBBBA) into law on the Fourth of July. The $3.8 trillion tax and spending package is a wide-ranging piece of legislation. The OBBBA’s “extraordinary breadth and ambition position it as one of the most consequential pieces of legislation in recent congressional history,” wrote Holland & Knight law.

The legislation extended the tax changes from 2017’s Tax Cuts and Jobs Act that would have expired later this year. Here is a brief review of some of the new provisions:

• A higher standard deduction. Anyone who doesn’t itemize will benefit from a change in the standard deduction. In 2025, the standard deduction will increase by $750 for single tax filers (from $15,000 to $15,750) and by $1,500 for those who file jointly (from $30,000 to $31,500), according to Michael Townsend of Schwab.
• A larger child tax credit: Families with children may benefit from a $200 increase in the child tax credit. The credit is reduced and phased out at higher income levels ($200,000 of modified adjusted gross income (MAGI) for single tax filers and $400,000 for those who file jointly), reported Kamaron McNair of CNBC.
• A temporary bonus for seniors: From 2025 through 2028, some Americans who are age 65 or older will benefit from a $6,000 special deduction. To qualify, they must have modified adjusted gross income of less than $75,000 for single tax filers or $150,000 for those who file jointly.
• A temporary increase in state and local tax (SALT) deduction caps. The cap for SALT tax deductions, which include property taxes, will be $40,000 in 2025. The amount will increase one percent a year for four years before dropping back to $10,000 in 2030.
• New caps on student loan amounts. The law limits the amounts students and parents can borrow from the government to pay for education. Beginning in 2026, graduate students can borrow $20,500 per year with a lifetime limit of $100,000 ($200,000 if pursuing a professional degree). The student lifetime borrowing limit for federal student loans will be $257,500.

 Elimination of green-energy tax credits. If you’ve been thinking about making energy-efficient home improvements or purchasing an electric vehicle, now is the time. These tax credits will be eliminated at the end of 2025.

• Temporary tax relief on tips and overtime. From 2025 to 2028, workers will be able to deduct up to $25,000 in tips and up to $12,500 in overtime pay.

There are many other provisions – savings accounts for newborns, auto loan interest deduction, higher estate tax exemptions, changes to health savings account eligibility – that may affect your financial plans. If you would like to talk about these changes, please get in touch.

WEEKLY FOCUS – THINK ABOUT IT

“The $3.4 trillion price tag for the OBBBA will drive the national debt to unprecedented levels, but that figure does not include associated interest costs from the higher level of borrowing needed to foot the bill. Interest costs on the legislation will add approximately $700 billion to federal deficits over the next 10 years, bringing the total cost of the legislation to $4.1 trillion.”

― Peter G. Peterson Foundation

Sources:

https://en.wikipedia.org/wiki/The_Boy_Who_Cried_Wolf

https://www.bloomberg.com/news/articles/2025-07-11/battle-hardened-wall-street-bulls-are-proving-very-hard-to-scare or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/07-14-25-Bloomberg-Battle-Harderned-Wall-Street%20-%202.pdf

https://www.barrons.com/articles/stocks-record-goldilocks-risks-25610b9f?refsec=markets&mod=topics_markets or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/07-14-25-Barrons-Stocks-Are-Hitting-Records%20-%203.pdf

https://www.barrons.com/livecoverage/stock-market-news-today-071025 or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/07-14-25-Barrons-Dow-Falls-Nearly-280-Points%20-%204.pdf

https://www.barrons.com/articles/second-quarter-earnings-s-p-500-record-highs-ed489727?refsec=the-trader&mod=topics_the-trader or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/07-14-25-Barrons-How-Second-Quarter-Earnings%20-%205.pdf

https://www.barrons.com/market-data?mod=BOL_TOPNAV or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/07-14-25-Barrons-DJIA-S&P-Nasdaq%20-%206.pdf

https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve&field_tdr_date_value=2025

https://www.hklaw.com/en/insights/publications/2025/07/the-one-big-beautiful-bill-act-a-comprehensive-analysis

https://www.schwab.com/learn/story/tax-bill-moves-on-to-senate-whats-next

https://www.cnbc.com/2025/07/09/trump-spending-bill-child-tax-credit.html

https://www.hklaw.com/-/media/files/insights/publications/2025/07/onebigbeautifulbillcomprehensiveanalysis.pdf?rev=02a78d4e65d8461bbb7b4e3c87ceab42&hash=A0C00C098DA5EF8A28DC7108B90F9D45

https://www.pgpf.org/article/the-one-big-beautiful-bill-act-is-the-most-expensive-reconciliation-package-in-recent-history/

The Markets
Like riders on a giga coaster, investors experienced fear and exhilaration during the second quarter of 2025.

From April through June, investors rode markets up and down, banking through twists of news and events that had market moving potential. They swooped through the uncertain impact of tariffs on economic growth and inflation; the implications of a U.S. Treasury downgrade; the effects of fiscal policy changes in the Big Beautiful Bill; and conflicts in Ukraine and the Middle East. Here are some highlights from the quarter:

 Tariff turmoil. In early April, President Trump announced tariffs on a much larger scale than anyone expected, startling investors and raising concerns about economic growth and price inflation, reported Sarah Hansen of Morningstar. The CBOE Volatility Index (VIX), which is known as Wall Street’s fear gauge, shot up to 60. (Any reading above 30 signals a high level of fear, risk, and anticipated volatility.) As the VIX rose, the stock market fell.

 “The Dow shed 2,000 points in a day for the fourth time in the index’s history. All told, U.S. stocks shed some $6.6 trillion in market cap in the past two days based on preliminary figures…That’s the largest two-day market cap slide for U.S. listed stocks on record,” reported Connor Smith of Barron’s.

• A fast recovery. President Trump delayed immediate action on tariffs, opening the door to trade negotiations. His actions reassured investors, and U.S. stocks climbed to new highs. Through last week, “The S&P 500 is up 26 [percent] from the selloff low on April 8, while the Nasdaq has surged 34.9 [percent], as the worries, from supersized tariffs to the U.S.’s artificial-intelligence dominance, have slowly faded,” reported Teresa Rivas of Barron’s.

 International stocks performed even better than U.S. stocks did. “European stocks, a thoroughly unloved asset class in January, have trounced the S&P 500 by 16 percentage points in dollar terms, the biggest outperformance since 2006…After underperforming the US market every year since 2017, developing-country equities are finally winning, helped by a boom in [artificial intelligence] companies from Taiwan, South Korea and China,” reported Alice Gledhill, Malavika Kaur Makol and Sagarika Jaisinghani of Bloomberg.

• Excellent earnings growth. During earnings season, companies let investors know how they performed in the previous quarter. Collectively, companies in the Standard & Poor’s (S&P) 500 Index reported earnings growth of 12.9 percent for the first quarter of 2025. It was the second consecutive quarter of double-digit earnings growth, reported John Butters of FactSet. (Earnings are a measure of profitability.)

 Tariffs were the hot topic on earnings calls. They were mentioned by 427 S&P 500 companies. Some companies were concerned about tariffs. Some were not. The head of a financial firm told Sabrina Escobar of Barron’s, “The simple truth today is that we don’t yet know where trade policy will settle, nor do we know what the actual transmission effects will be on the real economy.”

• The U.S. Federal Reserve (Fed) kept rates unchanged. Despite significant pressure from the administration to stimulate the economy by lowering rates, the Fed left the federal funds rate unchanged. At the end of the quarter, inflation was near the Fed’s two percent target and unemployment remained low. Both suggest the economy remains resilient.

Major U.S. stock indexes continued to move higher last week, with the S&P 500 and Nasdaq finishing the week at record highs. Yields on U.S. Treasuries moved higher last week after a stronger-than-expected employment report lowered expectations that the Fed might cut the federal funds rate in July, reported Sean Conlon, Alex Harring, and Sawdah Bhaimiya of CNBC.

PATRIOTIC FEELINGS. Last week, Americans celebrated the Fourth of July. Independence Day has been a national holiday since 1941, but the tradition began long before that. Americans have been celebrating Independence Day since “the 18th century and the American Revolution. On July 2nd, 1776, the Continental Congress voted in favor of independence, and two days later delegates from the 13 colonies adopted the Declaration of Independence, a historic document drafted by Thomas Jefferson. From 1776 to the present day, July 4th has been celebrated as the birth of American independence, with festivities ranging from fireworks, parades and concerts to more casual family gatherings and barbecues,” according to History.com.

A recent survey asked Americans about the Fourth of July, patriotism and the American Dream. Here’s what they said:

WEEKLY FOCUS – THINK ABOUT IT
“This is your democracy. Make it. Protect it. Pass it on.”
― Thurgood Marshall, Former Supreme Court Justice

Sources:

https://www.barrons.com/articles/stock-market-fed-rate-cuts-d0252a07?mod=Searchresults or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/07-07-25-Barrons-Stocks-Are-Flying-the-Dollar-is-Falling%20-%201.pdf

https://www.morningstar.com/markets/13-charts-q2s-major-market-rebound

https://finance.yahoo.com/news/cboe-volatility-index-vix-measured-153231819.html

https://www.cboe.com/tradable_products/vix/ [Video 1:15]

https://www.barrons.com/livecoverage/stock-market-today-040425 or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/07-07-25-Barrons-Nasdaq-Enters-Bear-Market%20-%205.pdf

https://www.barrons.com/articles/stock-market-hits-record-highs-tax-bill-jobs-6f818d48? or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/07-07-25-Barrons-Stocks-Hit-Record-Hights%20-%206.pdf

https://www.bloomberg.com/news/newsletters/2025-06-30/rollercoaster-first-half-is-ending-with-stocks-at-records or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/07-07-25-Bloomberg-Rollercoaster-First-Half-Is-Ending%20-%207.pdf

https://insight.factset.com/earnings-insight-infographic-q1-2025-by-the-numbers

https://www.barrons.com/articles/tariffs-earnings-calls-stock-ccab0e3b or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/07-07-25-Barrons-CEOs-Are-Saying-These-2-Ominous%20-%209.pdf

https://www.federalreserve.gov/newsevents/pressreleases/monetary20250618a.htm

https://www.barrons.com/market-data?mod=BOL_TOPNAV or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/07-07-25-Barrons-DJIA-S&P-Nasdaq%20-%2011.pdf

https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve&field_tdr_date_value=2025

https://www.cnbc.com/2025/07/03/us-treasury-yields-investors-await-junes-big-jobs-report-.html

https://www.history.com/articles/july-4th

https://d3nkl3psvxxpe9.cloudfront.net/documents/July_Fourth_poll_results.pdf

https://www.usatoday.com/story/news/2024/06/19/patriotic-quotes-america-usa/74070993007/#

The Markets

Employment was top of mind for financial markets last week.

Economists and investors hoped May employment information would provide insight to the state of the United States economy, as well as clues about when the Federal Reserve (Fed) may lower the federal funds rate again.

Employment data arrives in two reports that offer different perspectives on the employment situation. Last week, the trends were similar – new jobs creation slowed from April to May – although the number of new jobs reported was quite different. Here’s a brief overview:

+37,000 new jobs per the ADP National Employment Report. Mid-week, this supplemental report showed fewer new jobs were added in May (37,000 new jobs) than had been created in April (62,000 new jobs).

“That was a big miss vis-a-vis what economists were expecting, and so we saw a negative market reaction initially. But if you talk to economists, guess what, they say that ADP number is not a very good predictor of the [Bureau of Labor Statistics] number, and they really give it much less weight, if any weight at all,” reported Julie Hyman of Yahoo!Finance.

+ 139,000 new jobs per the Bureau of Labor Statistics (BLS). On Friday, the government’s Employment Situation Summary reported more jobs were created than economists had anticipated. However, jobs growth slowed from April (147,000 new jobs) to May (139,000 new jobs), and initial estimates for March and April were revised lower.

“While the headline number came in higher than expected, previous months were revised lower — a pattern which has been repeating itself for a while now and which has prompted a lot of head-scratching,” reported Tracy Alloway and Joe Weisenthal of Bloomberg. The pair cited a source who believes one reason for the revisions is that key data about U.S. business closures and business openings arrives after the initial report is issued.

The unemployment rate, which is determined by a survey of households, remained steady at 4.2 percent in May. “…the household survey found a 625,000 decline in the labor force, which helps the jobless rate since those not in the workforce aren’t counted as unemployed,” reported Randall Forsyth of Barron’s.

So, what did the report tell us about the economy and prospective Fed rate policy? “Not as bad as feared but not as good as it looks. That’s what the latest employment data show. But for financial markets, the numbers suggest that the Federal Reserve may be slower to lower interest rates,” reported Forsyth.

By the end of the week, major U.S. stock indexes were all in positive territory year-to-date, reported Connor Smith of Barron’s. Yields on longer maturities of U.S. Treasuries moved higher over the week.

ABOUT BORROWING AND LENDING. In the United States, many people engage in short-term borrowing. They use credit cards to acquire goods or services – springing for a dinner out, charging the cost of a new video game, or purchasing a replacement refrigerator. Then, they pay the money back. If the credit cardholder doesn’t reimburse the card provider in full each month, then they will owe interest on the money they’ve borrowed. Buying on credit is fast and convenient, and it can be quite profitable for the lender.

In China, the payment system can work differently. It’s more of a “pay now and buy later” approach where buyers lend their money to companies, reported The Economist. 

“When you get a haircut or eat at a restaurant, the seller encourages you to pay in advance for multiple transactions. You might pay upfront for ten haircuts, or put 1,000 yuan ($140) on a pre-paid card, and the business will, in return, give you extra credit to spend… The bonus the firm adds to the customer’s deposit rises with the size of the initial outlay, and can be large. Customers putting down 10,000 yuan can receive an extra 2,000 yuan to spend in the store. If they use the money within a year, that amounts to an annual “interest” rate of 20 [percent], paid in kind.”

See what you know about borrowing and lending by taking this brief quiz.

1. If the Chinese system seems familiar, it may be because it’s similar (in some ways) to gift cards. In 2024, Americans spent more than $300 billion on gift cards, according to a source cited by Charles Passy of MarketWatch. However, many Americans don’t use the gift cards they receive. That can make gift cards very profitable for companies. In 2024, a popular coffee retailer reported it had a significant amount of money stored in unredeemed gift cards and did not expect most of the cards to ever be redeemed. How much money was it?

1. $379 million
2. $985 million
3. $1.77 billion
4. $4.56 billion

2. When people buy bonds, they agree to lend their money to a government or organization. In return, the government or organization agrees to repay the loan and pay a specific amount of interest. Imagine that you lend your child $2,000 to buy a car. In exchange, they promise to repay you $200 a month (until the debt is repaid) and to mow your lawn every week. In this example, the lawn mowing would:

1. Probably never happen.
2. Represent the repayment of principal.
3. Represent the payment of interest on the loan.
4. Be your reward for being a wonderful parent.

3. A credit score offers insight to a person’s financial circumstances at a specific time, and helps financial institutions decide whether to lend to a person or not. The practice began in 1989 when the first credit-scoring algorithm was created. How many credit scores can a person have?

1. One
2. Three
3. Fourteen
4. Hundreds

4. When people buy homes, the mortgage rates received are based on a specific benchmark. When the benchmark rate is higher, so is the mortgage rate. What is the benchmark for the 30-year mortgage rate?

1. The 5-year average return of the Standard & Poor’s 500 Index
2. The Federal Open Market Committee federal funds rate
3. The 10-year U.S. Treasury note rate
4. The Big Mac Index

Weekly Focus – Think About It
“The pleasure of rooting for Goliath is that you can expect to win. The pleasure of rooting for David is that, while you don’t know what to expect, you stand at least a chance of being inspired.”
 – Michael Lewis, Author

Answers: 1) c; 2) c; 3) d; 4) c

Sources:

https://mediacenter.adp.com/2025-06-04-ADP-National-Employment-Report-Private-Sector-Employment-Increased-by-37,000-Jobs-in-May-Annual-Pay-was-Up-4-5#:

https://mediacenter.adp.com/2025-04-30-ADP-National-Employment-Report-Private-Sector-Employment-Increased-by-62,000-Jobs-in-April-Annual-Pay-was-Up-4-5

https://finance.yahoo.com/video/private-vs-govt-jobs-where-214534342.html

https://www.bls.gov/news.release/empsit.nr0.htm (report and Table B)

https://www.bloomberg.com/news/newsletters/2025-06-06/america-s-data-disaster-is-already-here? or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/06-09-25-Bloomberg-Americas-Data-Disaster%20-%205.pdf

https://www.barrons.com/articles/jobs-report-fed-rate-cuts-ff1b6878?refsec=economy-and-policy&mod=topics_economy-and-policy

https://www.barrons.com/livecoverage/stock-market-news-today-060625?mod=hp_LEDE_C_2 or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/06-09-25-Barrons-The-Bottom-Line-of-the-Jobs-Report%20-%207.pdf

https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve&field_tdr_date_value=2025 or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/06-09-25-Barrons-Stocks-Rally-In-Wake%20-%208.pdf

https://www.investopedia.com/how-do-credit-cards-work-5025119#

https://www.economist.com/china/2025/05/29/chinas-crazy-reverse-credit-cards or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/06-09-25-Economist-Chinas-Crazy-Reverse-Credit-Cards%20-%2010.pdf

https://www.marketwatch.com/story/people-are-spending-300-billion-a-year-on-this-product-some-experts-say-they-should-stop-7c73aaff#

https://www.marketwatch.com/story/the-bank-of-starbucks-coffee-retailer-has-1-77-billion-in-unredeemed-gift-cards-138df8f5

https://www.econlib.org/library/Topics/Details/bonds.html

https://www.creditkarma.com/credit/i/how-many-credit-scores-do-i-have

https://www.fanniemae.com/research-and-insights/publications/housing-insights/rate-30-year-mortgage

https://www.goodreads.com/author/quotes/776.Michael_Lewis