much-anticipated speech, Federal Reserve (Fed) Chair Jerome Powell said, “In the near term, risks to inflation are tilted to the upside, and risks to employment to the downside—a challenging situation…Nonetheless, with policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance.”

Investors celebrated and financial markets rallied.

“Powell’s speech sparked the strongest cross-asset rally since April…,” reported Rita Nazareth of Bloomberg. On Friday, “The S&P 500 climbed 1.6 [percent], with tech megacaps rebounding. The Russell 2000 of small firms jumped about 4 [percent]. Two-year yields sank 11 basis points to 3.68 [percent]. Traders boosted bets on a Fed cut next month, pricing in an 85 [percent] chance of a move. The dollar fell.”

Monetary policy – the steps the Fed takes to maximize employment and keep prices stable – can be:

• Restrictive when the federal funds rate is high enough to restrain economic activity and curb inflation.
• Neutral when the federal funds rate is at a level that does not stimulate or restrain the economy.
• Accommodative when the federal funds rate is low enough to stimulate economic activity and reduce unemployment.

Recent economic data showing a slowdown in employment and an uptick in inflation complicate the upcoming rate-setting decision, reported Joseph E. Gagnon of the Peterson Institute for International Economics.

When the Fed lowers the federal funds rate, the cost of borrowing moves lower as rates on home equity loans, auto loans, and credit cards typically follow the Fed. Lower borrowing costs may create opportunities for businesses to invest in new ventures and hire more workers. A rate cut also can boost consumer spending, reported Sarah Foster of Bankrate. The exception to this rule is mortgage loans. The rate for 30-year fixed mortgages typically tracks the benchmark 10-year Treasury note.

Last week, after the Fed Chair’s speech, the Dow Jones Industrial Average closed at a record high, and U.S. Treasuries rallied as yields moved lower, reported Karishma Vanjani of Barron’s.

WHAT DO YOU KNOW ABOUT FASHION? The fashion industry is an important part of the global economy. It employs 300 million people and is expected to have global revenue of $2 trillion by 2026, reported Elaine Ritch for Economics Observatory.

Like all industries, fashion has hits and misses. There are trends that shine and trends that perplex. Consider Big Red Boots (BRBs), which were introduced at New York Fashion Week in 2023. The cartoon-style boots looked like they’d been pulled from Mario’s closet and retailed for $350. Their popularity was tempered by suction issues – the grippy rubber boots proved difficult to remove, reported Christian Allaire of Vogue.

See what you know about fashion trends today, and in the past, by taking this brief quiz:

1. The Communist Party reportedly does not approve of the latest fashion trend in China, but demand for a particular type of sun protection gear has been on the rise. What are Chinese women wearing to the beach?
2. 1. Glare goggles
   2. Sunsuits
   3. Shade sleeves
   4. Facekinis

 

2. People of a certain age may remember platform shoes as a disco-era wardrobe necessity. The 70’s weren’t the first time thick-soled shoes trended, though. In 16^th century Venice, “chopines” – boots with platforms that were up to 20 inches tall – were popular. Theboots were worn to:

1. 1. Strengthen ankles and calves.
   2. Provide protection in combat.
   3. Protect shoes and dresses from muck.
   4. Wade across shallow canals.

 

3. In the 1960s, dresses made of an unusual material that was printed with geometric patterns became very popular. What were the dresses made of?

1. 1. Polyester
   2. Paper
   3. Chocolate
   4. Vinyl

 

4. Which of the following is NOT an iconic fashion piece, according to Glam Observer?

1. 1. Little black dresses
   2. Poodle skirts
   3. Denim jeans
   4. Trench coats

 

WEEKLY FOCUS – THINK ABOUT IT

“The best fashion show is definitely on the street. Always has been and always will be.”
— Bill Cunningham, Photographer

 

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

 

Sources:

https://www.federalreserve.gov/newsevents/speech/powell20250822a.htm

https://www.bloomberg.com/news/articles/2025-08-21/stock-market-today-dow-s-p-live-updates?srnd=phx-markets or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/08-25-25-Bloomberg-Wall-Street-Has-Best-2.pdf

https://www.investopedia.com/terms/m/monetarypolicy.asp

https://www.federalreserve.gov/faqs/what-does-the-federal-reserve-mean-when-it-says-monetary-policy-remains-accommodative.htm

https://www.piie.com/blogs/realtime-economics/2025/feds-september-dilemma

https://www.bankrate.com/banking/federal-reserve/how-federal-reserve-impacts-your-money/

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

https://www.barrons.com/livecoverage/stock-market-news-today-082225/card/dow-marks-first-record-close-of-the-year-as-s-p-500-nabs-new-high-3FEYOjg5CcgmPAwTmvae or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/08-25-25-Barrons-Dow-Markets-First-Record-8.pdf

https://www.economicsobservatory.com/fast-fashion-what-are-the-true-costs

https://www.vogue.com/article/everyone-is-wearing-mschf-big-red-boots or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/08-25-25-Vogue-Why-Is-Everyone-10.pdf https://www.economist.com/business/2025/08/21/chinas-hottest-new-look-the-facekini or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/08-25-25-Chinas-Hottest-New-Look-11.pdf

https://www.bbc.co.uk/bitesize/articles/zd8rvwx

https://glamobserver.com/8-iconic-fashion-pieces-in-the-history-of-fashion/

https://www.brainyquote.com/authors/bill-cunningham-quotes

The Markets

Was inflation higher, lower, or steady?

Perspective has a tremendous influence on how we perceive the world around us. If you saw any three-dimensional chalk drawings on sidewalks this summer, you understand how perspective affects understanding. When seen from one direction, a chalk drawing looks flat. When seen from another, a winged dragon surges from a hole in the pavement.

Last week, major news sources had varied perspectives on inflation. Here are a few of the headlines we saw:

“Core Inflation Rises to 3.1 [percent]” (Barron’s)

“Inflation holds steady…” (CNN)

“Inflation cools slightly in July from prior month” (Fox Business)

Remarkably, all were correct. The news sources simply highlighted different aspects of the Consumer Price Index (CPI). Here’s what the CPI showed for June and July of this year.

 

	June 2025 (month to month)	July 2025 (month to month)	June 2025 (year over year)	July 2025 (year over year)
Headline inflation (all items measured)	0.3%	0.2%	2.7%	2.7%
Core inflation (excludes volatile food and energy prices)	0.2%	0.3%	2.9%	3.1%

 

Headline inflation moved slightly lower, on a month-to-month basis (from June to July). It remained steady year over year, which is the 12-month period through July 2025. In contrast, core inflation, which excludes volatile food and energy prices, moved slightly higher on a month-to-month basis (from June to July). It increased year over year.

The Federal Reserve (Fed)’s target for inflation is 2 percent.

The Producer Price Index (PPI) came out last week, too. It tracks how prices have changed for groups that produce and sell goods and services. It was up 3.3 percent in July, year over year, which was higher than June’s 2.4 percent increase.

“U.S. wholesale inflation accelerated in July by the most in three years, suggesting companies are passing along higher import costs related to tariffs. The producer price index increased 0.9 [percent] from a month earlier, the largest advance since consumer inflation peaked in June 2022…,” reported Augusta Saraiva of Bloomberg.

Last week, major U.S. stock indexes continued to rally. U.S. Treasury yields were mixed. Yields for some shorter maturities of Treasuries moved lower, while yields on longer maturities rose.

WHERE ARE INTEREST RATES HEADED? One of the drivers behind the recent stock market rally has been an expectation that the U.S. Federal Reserve (Fed) will respond to softening economic data by lowering the federal funds rate, reported Saeed Azhar, Johann M Cherian and Sanchayaita Roy of Reuters.

Fed rate cuts are intended to stimulate economic growth by making it less expensive to borrow money. When it’s cheaper to borrow, companies’ expenses may fall and profits can increase, lifting stock prices, reported Mary Hall of Investopedia.

After last week’s Consumer Price Index was released, expectations for a September Fed rate cut soared above 90 percent, according to CME FedWatch. “Inflation is still higher than the Federal Reserve would like — but not high enough to stop the central bank from cutting interest rates next month. That’s investors’ takeaway from yesterday’s consumer price index report,” reported Phil Serafino and Edward Bolingbroke of Bloomberg.

The catch is that a Fed rate cut doesn’t always have the intended effect. Sometimes, the Fed reduces or increases the federal funds rate and other interest rates don’t follow suit. Bloomberg Economics Chief Economist Tom Orlick explained:

“Let’s cast our minds back briefly to the early 2000s, to [former Fed Chair] Ben Bernanke and to the famous savings glut hypothesis. So, back then, the Fed was hiking [the federal funds rate] but long-term Treasury rates weren’t going up. Bernanke said it’s because there’s a glut of global savings. All of this money is coming from China and Saudi into the U.S. Treasury market…that situation is reversed and we’re no longer in a world with a savings glut. We’re in a world with a savings shortage. And that means it doesn’t matter who President Trump appoints as the next Fed chair…that savings shortage is going to mean that long-term rates, the 10-year Treasury yield stays high and…we think 4 to 5 percent for the 10-year Treasury is the new normal.”

The 10-year U.S. Treasury note yielded 4.27 percent at the start of last week. By week’s end it was at 4.33 percent.

WEEKLY FOCUS – THINK ABOUT IT
“I don’t think there’s too much normal out there anymore. Though there’s still plenty of average to go around.”
― John David Anderson, Author

Sources:

https://www.barrons.com/livecoverage/inflation-july-cpi-rate-report/card/core-inflation-rises-to-3-1–UD6vxFsucLKhK6pJYSX8 or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/08-18-25-Core-Inflation-Rises-1.pdf

https://www.cnn.com/2025/08/12/economy/us-cpi-consumer-inflation-july

https://www.foxbusiness.com/economy/cpi-inflation-july-2025

https://www.bls.gov/news.release/cpi.nr0.htm

https://www.bls.gov/news.release/archives/cpi_07152025.htm

https://www.richmondfed.org/publications/research/econ_focus/2024/q1_q2_federal_reserve

https://data.bls.gov/timeseries/WPUFD4&output_view=pct_12mths

https://www.bloomberg.com/news/articles/2025-08-14/us-producer-prices-rise-by-most-in-three-years-on-services

https://www.barrons.com/market-data or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/08-18-25-Barrons-Market-Graphs-9.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.reuters.com/world/us/sp-500-nasdaq-hit-new-closing-highs-rate-cut-hopes-2025-08-13/ https://www.investopedia.com/investing/how-interest-rates-affect-stock-market/

https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/08-18-25-FedWatch-Market-Rate-Probabilities-11.pdf

https://www.bloomberg.com/news/newsletters/2025-08-13/fed-rate-cut-bets-ramping-up-after-inflation-data?srnd=phx-economics-v2 or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/08-18-25-Fed-Rate-Cut-Bets-12.pdf

https://www.bloomberg.com/news/videos/2025-08-07/-the-price-of-money-with-bloomberg-s-tom-orlik-video

https://www.goodreads.com/quotes/search?q=unexpected

 

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.

2025 CPI	Headline inflation (All prices, year over year)	Core inflation (excluding food and energy prices, year over year)
June	2.7 percent	2.9 percent
May	2.4 percent	2.8 percent
April	2.3 percent	2.8 percent
March	2.4 percent	2.8 percent
February	2.8 percent	3.1 percent
January	3.0 percent	3.3 percent
Source: Bureau of Labor Statistics

 

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:

 

The 4th of July is a time for fun and relaxation:	63 percent
I am patriotic:	71 percent
I believe other Americans are patriotic:	74 percent
I am proud to be an American:	68 percent
Voting is a duty:	21 percent
Voting is a right:	31 percent
The American Dream is attainable for me:	36 percent
The American Dream is attainable for others:	32 percent

 

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/#