This week’s episode covers the continued uncertainty around tariffs, news around cryptocurrency, and the potential for increased inflation in the rest of the year. Watch as Gary Quinzel, Vice President for Portfolio Consulting, discusses how the markets and the US dollar reacted to this news.

TRANSCRIPT:

Hi, everybody. Thank you for joining this week's edition of the 7 Market Movers. My name is Gary Quinzel, Vice President of Portfolio Consulting at Wealth Enhancement. Overall, it's been another good week for the markets.

The S&P 500 briefly crossed 6,300—once again closing at a new all-time high. We've observed that economically sensitive sectors have been outperforming, and we even saw a boost in the crypto industry when we saw that Congress passed a stablecoin bill, certainly injecting some confidence for investors in the crypto industry and anyone holding a Bitcoin or other crypto assets. And overall, we're just seeing a lot of continued optimism and confidence that the economy and the market can grow despite the continued uncertainty around tariffs and other things that are happening around the world from a geopolitical perspective.

So I'm going to zero in on some of those positives from an economic standpoint. First, we'll talk a little bit about retail sales, the latest stat that came out today. We saw month over month or in June, the retail sales were up 0.6%. As always, doesn't sound like a lot, but after two consecutive monthly declines, certainly well received and it's helped temper some concerns around consumer spending.

I think the thought amongst practitioners in our industry is that as long as high-income earners in particular keep spending and unemployment remains solid, the economy will keep growing. And that means earnings will keep going at a growing pace and stock prices will continue growing. And that's why we're continuing to see the market trading near all-time highs. On the point about unemployment, initial jobless claims came in at 221,000, which was below expectations, actually the fifth straight week that we saw a decline in unemployment claims and the lowest level since April.

So that's certainly just another sign that the labor market has yet to crack. We're still sitting with relatively low unemployment. And as long as we continue to see that, we see strong spending, we got some indication that the market can continue to grow. On the negative side, we saw a little bit of uncertainty midweek.

One headline was certainly around the potential of President Trump firing Fed Chief Jerome Powell. This has circulated more than once and has rattled markets a little bit. Thankfully, those claims were dismissed. And it keeps bringing up this topic around Fed independence and what that means to the price of the US dollar and rates, etcetera.

I think we can all agree that Fed independence is very important for US markets, and that's something that the rest of the world looks up to us for that matter. So anytime that kind of enters the picture, we start seeing a little bit of volatility. But again, thankfully, that's settled up relatively quickly. Probably more importantly, in my opinion, if you look at the inflation data, the headline numbers are pretty good.

Overall CPI month over month in June came in right at expectations, 0.3% month over month. If you exclude food and energy, it actually came in below expectations at 0.2%.

That's good, but if you dissect it or peel it back a layer, one of the reasons that we saw better inflation numbers was because we saw a decline in auto, both used and new autos. And if you look at the broader durable goods category, which includes, of course, vehicles, but it also includes things like appliances and furniture and other consumer electronics, big ticket items that consumers purchase, Overall, if you exclude autos, that category is up 5.8% on an annualized basis over the last three months. So, there are some signs that some of those bigger ticket items are increasing in price.

And that's one of the things that the Fed is keeping a very close attention on. And there were recently some comments by Fed Reserve President of New York, John Williams. He came out and talked about expecting tariffs to boost inflation by around 1% over the second half of the year into next year, potentially seeing a 1% hit to GDP. You know, these are the types of things that the Fed is looking at and the reason why they're waiting and being very, very cautious because we haven't seen the tariffs cause inflation yet.

But a big reason for that is because a lot of companies went out, stock their shelves, they stock their warehouses when the tariffs were announced. But eventually those shelves are going to be depleted. And so, the expectation is that we could maybe see some inflationary impact later in the summer or into the second half of the year. So we'll certainly see.

But that is the reason why the Fed is being very, very patient. If you just go around the markets a little bit, quick roundup here, we noticed the Russell 2000 Small Cap Index is having a good month to date up around 3.65%, finally in the black, after having a rough go to start the year. Also, international developed stocks, the EAFE index, is having a negative month. That is the top leading country sector category, I should say, year to date.

They're down this month, and a big part of that has to do with the US dollar, which has actually staged a little bit of a recovery after having one of the biggest declines in the first half of the year in over a decade.

Bonds, on the other hand, have been declining. We've observed the 10-year yield up from around 4.2% to around 4.45% month to date. So, we're seeing a little bit of pressure on bonds. But overall, market is humming along, at least for U.S. Large Caps, and we're sitting at pretty good gains year to date. And so the concerns have been pushed out yet another week. As an investor, we can't think that we're out of the woods yet.

We obviously are very cognizant of the concerns that continue that remain related to tariffs and growth and geopolitical concerns. But as always, we take a very long-term time horizon and long-term perspective as we think about investing. If you have any questions about any of these topics, please don't hesitate to reach out to your financial advisor. They'd be happy to answer you or put you in touch with us, and we'd be happy to dive in some more.

So with that, hope you enjoyed today this week's update. Thank you all. Have a great day and a great week. Take care.

This information is not intended as a recommendation. The opinions are subject to change at any time and no forecasts can be guaranteed. Investment decisions should always be made based on an investor's specific circumstances. Investing involves risk, including possible loss of principal.

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