A potentially very expensive summer…

Earlier today, the Senate passed its version of President Trump’s so-called “Big, Beautiful Bill” before the self-imposed July 4 deadline. The path forward remains rocky as the Senate bill is projected to increase the U.S. deficit by more than $3.3 trillion over the next 10 years. This proposed deficit increase flies in the face of prior Administration promises to reduce debt in previous tax bills. Yet to be seen is whether the House will approve this version of the bill which is even more expensive than the version it previously approved several weeks ago.

When coupled with an already large structural deficit of almost 7% last year during a period of economic expansion, many analysts consider the proposed bill to be severely detrimental to the country’s long-term finances. The trillion-dollar question is whether enough House Republicans will go along with the revised bill or whether there remain enough fiscal conservatives to choose to follow a more prudent fiscal path. The Administration continues to target having a final approved bill from Congress for presidential signature by this Friday.

Looking to the markets, in the just completed quarter, a sharp market selloff, driven by President Trump’s new tariff regime, ended with a significant market rebound. The S&P 500 and the Russell 1000 Value both closed out June at, or near, highs for the first time since February and clocked some of their strongest quarterly gains since early 2024.

Meanwhile, last Friday the Fed’s preferred monthly inflation measurement was released – the Personal Consumption Expenditures index (PCE) which rose 0.1% month over month with its reading of 2.3% annualized growth. Meanwhile Core PCE was 0.1% higher than expected at 2.7%, exceeding expectations for a 2.6% print.

As it feels its way forward regarding interest rates, the Federal Reserve is keeping a keen eye on employment. One piece of data that is likely of interest is that the unemployment rate for recent college graduates continues to rise-now up to 5.8% through the month of March. Outside of the COVID era, this is the highest unemployment rate for these recent graduates since 2012. Economist are starting to call this economy a “no hire, no fire economy.” We will need to wait and see how the central bank and Chair Powell continue to assess, and act, on this data at their July-end meeting.