Research

As central bankers, economists, and policymakers gathered last weekend in Wyoming’s Grand Teton National Park for the 2025 Jackson Hole Economic Symposium, the Federal Reserve (Fed) found itself at a critical juncture marked by political pressures, personnel changes, and internal divisions over monetary policy direction.

As we wrote on August 11, companies have done a good job overall adjusting to tariffs so far, which was evident during earnings season. While several factors have helped mute the recent tariff effects, companies will experience more cost pressures in the months ahead.

We have been pleasantly surprised by how well stocks have handled the sharp increase in tariffs. Since the market low from the early April tariff scare, the S&P 500 Index has gained more than 28%.

Last week was one for the ages in terms of the number and magnitude of events and data points for investors to digest. A Federal Reserve (Fed) meeting, the monthly jobs report, and the peak week of earnings season would be enough to qualify as a busy week.

Last week, investors were reminded of the persistent impact the pandemic had on many macro models. In particular, the Leading Economic Index (LEI), which has historically been the Conference Board’s accurate leading indicator of the business cycle, still points to a deep, imminent recession as of last month.

And while we think the interplay between the good (lower rates) and bad (higher term premium) will persist throughout the rest of the year, given the still resilient economic conditions, we think rates, particularly the 10-year Treasury yield, could drift higher in the near term before ending the year between 4.0% to 4.5%.

If “tariff” isn’t the word of the year for stock investors so far, then perhaps it’s “uncertainty.” Uncertainty around trade policy dominated the path of the stock market in the first half and will continue to play a large role in the second half.