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Macro Minute: Week of June 30, 2025

Written by Wes Johnson on . Posted in Macro Minute.

I feel like I need to revisit some of the thoughts I had during the liberation day tariff announcements. https://longviewfa.com/macrominute_04-07-2025/  By and large, I still believe in the conclusions that I came to at that time, but I have changed my perspective on a few major things.   After the initial tariff announcement, I became concerned, like the market, that these rates were going to drive an economic slowdown and probable recession in the U.S. The administration changed tactics a few weeks later after the stock market crashed about 20% and the bond market began showing signs of being “yippy”, to quote President Trump. Since that time the stock market has bounced back, and the bond market has stabilized.  

With the equity market having had its panic moment and now recovery, it would take a new concern to take it back down. What has changed is my thinking that we would have a significant slowdown and possible recession. As the Big Beautiful Bill is making its way through Congress, it is becoming increasingly clear that meaningful spending cuts are not going to manifest from this legislation. In fact, it could be quite the opposite. Spending looks set to increase at least initially. We are also seeing that leading economic indicators are now rebounding. They have had quite the bumpy road since the election. Upon President Trump’s election victory, economic indicators started soaring. When he started enacting his agenda, they started crashing. Now, they are rebounding. I have said before that the data is a mess and unreliable. This has become a headline and policy driven market. It is dangerous to get too bullish or bearish in this environment because the policy that makes you bullish/bearish can be reversed just as quickly.  

Let me give you my current thoughts on how markets look to me. 

  • I believe the U.S. dollar has started a decline versus other currencies after being strong for a very long time. 
  • I believe international markets will outperform U.S. markets for the next few years, especially on a dollar-weighted basis. 
  • International investors will be attempting to get back to a more neutral weighting of U.S. exposure after building a dramatic overweight. This will first look like hedging their dollar currency exposure, then investing new savings into international markets, and then eventually selling U.S. assets to fund international purchases. This is a long trend and will take a long time to play out. We are likely only at the currency exposure part of the move. 
  • The U.S. will most likely escape a recession. 

Here are a few things that I will lump into the “too hard” category and don’t know. 

  • I have no idea what the Federal Reserve will do or should do. 
  • Inflation appears tame, but it could heat back up later in the year with all the stimuli being implemented around the globe. I just don’t know. 
  • I don’t know who is going to show up and buy government debt in developed economies that are running fiscal largesse policies. 
  • Housing financing appears to be structurally impaired at these levels. I was recently in Nashville and our Lyft driver said he was a mortgage broker that has transitioned to driving mainly for his income and any mortgages he got were the extra income. A complete flip of how it had been. Housing is going to be difficult for a while. 
  • I don’t know who are going to be the big winners of AI but there is a lot of money being thrown in that area. 

I don’t know if this was any pleasure to read or not, but I thought it might be helpful for me to revisit some of my earlier thoughts and give my current brain dump of beliefs and unknowns. Please let me know if you found this helpful or not. If yes, I may revisit this structure from time to time.  

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