Uriel Loredo

Fed’s July Meeting: No Changes, but Signs of Slowdown

July Fed Monetary Policy Statement 

As markets anticipated, the Federal Reserve left its benchmark interest rate unchanged, maintaining the target range at 4.25%–4.50%. Unlike the more optimistic tone in June, this time the Fed acknowledged a slowdown in economic activity during the first half of the year. 

While the labor market remains strong and unemployment stays low, inflation is still somewhat elevated. As a result, the Committee reaffirmed its commitment to its dual mandate: maximum employment and price stability. 

A key highlight was the lack of unanimous support. Two members—Bowman and Waller—voted in favor of a 25-basis-point rate cut. This marks the first time since 1993 that multiple Fed governors have dissented on a rate decision. 

Market Implications: 

Focus now shifts to the annual Jackson Hole symposium in August, where the Fed Chair traditionally provides guidance on the direction of monetary policy. Markets are still pricing in a potential rate cut in September, which would lower the target range to 4.00%–4.25%. 

Federal Funds Rate Expectations

Source: JP Morgan

Posted in Weekly Comment

Trade and Mixed Data: Signs of Stability in the U.S. and China

Solid U.S. labor market, trade deals with Asia, and monetary pauses in Europe and China.

Week of July 21–25 

Global Outlook: Stability Amid Mixed Signals 
Recent data and key announcements from both developed and emerging markets reveal a landscape of resilience with a few areas of concern. Here are the most relevant highlights from the week: 

United States: 

  • Treasury Secretary Scott Bessent plans to extend trade negotiations with China and will meet with officials in Stockholm. A new trade agreement was reached with Japan, including 15% reciprocal tariffs and $550 billion USD in Japanese investments. Japan will open its market to U.S. agricultural and automotive products. 
  • Jobless claims fell to their lowest level in three months, reflecting a strong labor market. 

Europe: 

  • The European Central Bank held its benchmark rate at 2%, pausing after four consecutive cuts amid elevated uncertainty. 
  • Negotiations with the U.S. are progressing toward a potential trade deal with a general 15% tariff, expected to be finalized before August 1. 

China: 

  • The People’s Bank of China kept benchmark interest rates unchanged following slightly better-than-expected GDP data. 

Brazil: 

  • Despite ongoing trade tensions with the U.S., GDP is projected to remain strong, 2.2% in 2025 and 1.7% in 2026. However, if negotiations break down, inflation may rise, with projections of 5.2% for this year. 

Mexico: 

  • The government plans a new bond issuance to support Pemex liquidity, estimated at $7 to $10 billion USD. Inflation declined to 3.55% in the first half of July, down from 4.32% in June. 

“The stock market is a device for transferring money from the impatient to the patient.” —Warren Buffett 

KEY EVENTS TABLE 

  • U.S. Federal Reserve announcement – 07/30 
  • U.S. Employment data release – 08/01 

Monitor

Posted in Weekly Summary

Although President Trump has criticized the Fed, the legal basis for dismissal appears weak

Despite recent criticisms from former President Donald Trump toward the Federal Reserve (Fed), the possibility of an early removal of Fed Chair Jerome Powell seems limited. The Federal Reserve Act of 1913 does not grant the Executive Branch the authority to dismiss its officials due to disagreements over monetary policy. In addition, a recent Supreme Court decision further reinforced the central bank’s independence, making intervention even more difficult. Although the law allows for removal “for cause,” this clause has never been tested, leaving the legal grounds for dismissal uncertain.

Against this backdrop, three scenarios emerge regarding the Fed’s future under new leadership:

The Fed would maintain a technical approach, free from political pressure.

  • More predictable policy
  • Lower inflation
  • Greater long-term stability
  • In the short term: a flatter yield curve and wider credit spreads

A more flexible stance could lead to more expansive policies.

  • Boost to short-term growth and inflation
  • Result: steeper yield curve and higher inflation expectations

The Fed could succumb to pressure to keep rates low despite high inflation.

  • Loss of credibility
  • High volatility and potential abrupt adjustments, as in the Volcker era (1979)

However, early dismissal could trigger:

  • Temporary volatility spikes
  • Weaker U.S. dollar
  • Stock market declines
  • Distortion of the yield curve

Since the 1970s, the Fed has remained committed to controlling inflation as a core institutional priority.

Source: Capital Group

Posted in Weekly Comment

Inflation edges up, solid earnings reports, and signs of economic resilience

Week of July 14–18 


A key week for markets, marked by economic data, fiscal decisions, and mixed signals across the globe. 


Investors closely monitored inflation, consumption, and growth figures. Here are some of the most relevant developments: 

  • U.S.: June retail sales beat expectations, showing resilient consumer demand. However, annual inflation rose to 2.7% due to higher tariffs. Q2 2025 earnings season began on a positive note. 
  • Europe: UK inflation in June hit its highest level since January, reducing expectations of further rate cuts. In Germany, the government approved a fiscal stimulus package to support economic growth. 
  • China: June exports exceeded expectations amid a fragile tariff truce with the U.S. GDP grew at an annualized rate of 5.2% in Q2, reflecting continued economic resilience. 
  • Brazil: The government projects gross debt will rise from 71.7% of GDP at the start of Lula’s administration to 82.3% by 2026, pointing to mounting fiscal pressure. 
  • Mexico: The U.S. announced a 17% tariff on Mexican tomatoes. President Sheinbaum signaled interest in strengthening trade ties with Canada after speaking with Prime Minister Mark Carney. 


“ Far more money has been lost by investors trying to anticipate corrections, than lost in the corrections themselves”.— Peter Lynch 

Key Upcoming Events: 

  • U.S.: Speech by Jerome Powell – 07/22 
  • U.S.: Housing sector data release – 07/24 

Monitor 

Posted in Weekly Summary

U.S. Inflation Inches Up; Markets Eye Impact of Upcoming Tariffs

June Inflation: Mixed Signals and Tariff Watch 

The June inflation report in the U.S. showed a modest monthly uptick, while underlying price pressures remain contained. The Consumer Price Index (CPI) rose 0.3% in line with expectations, while the annual rate increased to 2.7%, just above the 2.6% forecast. Core inflation rose 0.2% month-over-month and 2.9% year-over-year, showing no major surprises. 

Where are the biggest shifts? 

  • Food and durable goods saw a 0.3% increase, driven by higher prices for coffee, beverages, and household items. In contrast, prices for new and used cars continued to decline, helping ease core inflation. 
  • Services and energy were mixed. Gasoline prices rose 1.0% after four months of declines, and the housing index climbed 0.3%. Meanwhile, hotel and air travel costs edged down slightly, pointing to still-moderate demand. 

Despite the overall uptick, the market remains cautious. Attention is now on the potential impact of new tariffs set to take effect in August, particularly affecting electronics, apparel, and automobiles. 

Market implications: 

Markets are not expecting rate cuts before September, as they assess the effects of new tariffs amid ongoing political pressure for a more accommodative monetary policy. 

Annual headline inflation rose from 2.4% in May to 2.7% in June, while core inflation edged up from 2.8% to 2.9%. 

Posted in Weekly Comment

A new round of tariffs and mixed inflation signals shape the global economic agenda. 

Week of July 7–11 

Markets focus on trade decisions and mixed growth signals 

Amid a week marked by trade tensions and uneven economic data, here are the key highlights investors will be closely monitoring: 

• United States 
President Trump announced a 25% tariff on products from Japan and South Korea, effective August 1. For Canada, the tariff would be 35%. He also imposed 50% tariffs on copper imports and goods from Brazil. 
The Fed’s minutes revealed divided views on the timing and scale of potential rate cuts. 
Q2 2025 earnings season kicks off, with S&P 500 EPS growth expected at just 4%. 

• Europe 
Germany’s industrial production rose 1.2% month-over-month in May, driven by the automotive and energy sectors. However, exports fell 1.4% month-over-month, including a 7.7% drop in shipments to the U.S. 
The Bank of England highlighted the UK economy’s resilience despite ongoing geopolitical risks. 

• China 
Inflation rose 0.1% year-over-year in June, marking the first increase in five months. However, producer prices fell 3.6% annually, the lowest level since July 2023. 

• Brazil 
The government is planning a return to international debt markets by year-end, following two successful bond issuances this year. 
President Lula responded to U.S. tariffs by announcing 50% tariffs on American products. 

• Mexico 
Headline inflation eased to 4.32% in June, while core inflation ticked up slightly to 4.24%. 
Auto production hit a record high in June, posting 4.8% year-over-year growth. 

“History offers a crucial insight about market crises: they are inevitable, painful, and ultimately surmountable.” — Shelby M.C. Davis 

Important events in the next week 

  • U.S. inflation data – 07/15 
  • U.S. industrial production – 07/16 

Monitor 

Posted in Weekly Summary

“One Big Beautiful Bill Act”: Key Changes and Potential Impact 

Congress has approved President Trump’s fiscal package, officially named the “One Big Beautiful Bill Act” (OBBBA). The proposal includes bold tax adjustments that could significantly impact both economic growth and the country’s fiscal stability. 

Here are the main highlights: 

Taxes and Deductions 

  • The 2017 tax cuts are made permanent. 
  • New deductions of up to $25,000 for income from tips and overtime will apply through 2028. 
  • A temporary increase in the SALT deduction cap to $40,000 is introduced for households earning under $500,000. 

Cuts to Social Programs 

  • Funding for Medicaid and SNAP is reduced, and new work requirements are introduced. 
  • In total, food assistance programs are projected to be cut by $186 billion. 

Other Measures 

  • Defense and border security spending increases (around $150 billion each). 
  • Tax incentives for green energy are eliminated. 
    According to the CBO, the package could add $2.8 trillion to the deficit over the next decade. Public debt would rise from 98% to 125% of GDP. This could prompt credit rating agencies to reassess the U.S. sovereign rating. 

Market Implications:

The approval of this fiscal package may push Treasury yields higher as concerns grow over the deficit and rising debt issuance. If inflation picks up, the Fed may delay rate cuts—posing challenges for both bonds and equities. 

Public Debt-to-GDP Trend (%) 

Source: JP Morgan 

Posted in Weekly Comment

Solid employment, tax reform, and new trade deals dominate the global agenda. 

Week of June 30 – July 3 

A short week marked by new trade agreements and mixed economic data across major markets. 

Robust employment, tax reform, and mixed global signals 
Here are the most relevant developments from the international scene this week: 

• United States 

  • Nonfarm payrolls surprised to the upside, with 147,000 new jobs added in June, beating expectations of 110,000. The unemployment rate dropped to 4.1%.
  • The Senate approved President Trump’s fiscal plan, which includes new deductions and extends the 2017 tax cuts.  
  • A new trade agreement was announced with Vietnam. 

• Europe 

  • Eurozone inflation rose slightly to 2% year-over-year, in line with expectations. 
  • The European Union signaled willingness to accept a general 10% tariff if the U.S. reduces duties in key sectors such as alcohol, semiconductors, and pharmaceuticals. 

• China 

  • Manufacturing activity contracted for a third consecutive month, though at a slower pace. 
  • The services sector grew at its slowest rate in nine months, amid weakening demand and fewer new orders. 

• Brazil 

  • The Central Bank indicated that recent easing in inflation may allow for a reassessment of its monetary stance. The Selic rate remains at 15%, its highest level since 2006. 

• Mexico 

  • Banxico highlighted the strength of the financial system following the intervention of three institutions under investigation for alleged money laundering. 
  • Remittances totaled US$5.36 billion in May, a 4.6% year-over-year decline. 

“An investment in knowledge pays the best interest.” — Benjamin Franklin 

KEY UPCOMING EVENTS 

  • United States: FOMC minutes release – 07/12 
  • China: June inflation report – 07/09 

Monitor 

Posted in Weekly Summary

2Q25: Slower Earnings Growth and Margin Pressure for the S&P 500 

After the S&P 500 hit new highs, the focus is now on Q2 earnings season. Here are the key takeaways: 

  • Earnings kickoff: Big banks like Citigroup, JPMorgan, and Wells Fargo will kick things off on July 15. By early August, over 70% of the index will have reported. 
  • Earnings slowdown: S&P 500 EPS growth is expected to come in at +4% year-over-year—much lower than the 12% seen in Q1. Revenue growth is also set to slow to +4%, and margins are under pressure, falling from 12.1% to 11.6% quarter-over-quarter. 
  • Sector impact: Earnings in Energy are expected to drop by 28%, with Materials and Consumer Discretionary down 7%. On the flip side, Tech and Communication Services are leading the pack with gains of 18% and 28%, respectively. 
  • Tariff effect: New tariffs, which rose from 3% to 13%, are starting to make an impact. While companies haven’t fully passed the added cost to consumers yet, margin pressure is becoming more visible in the most exposed sectors. 
  • Full-year outlook: Analysts have trimmed their 2025 earnings forecasts for the S&P 500 by 2%, now expecting +7% growth for the year. A stronger recovery is projected for 2026, with growth around +14%. 

Market takeaway: 

Earnings growth is cooling and margins are feeling the squeeze. Still, lower expectations could leave room for upside surprises. 

Source: Goldman Sachs 

Posted in Weekly Comment

Geopolitical Easing and Mixed Global Growth Signals 

Rate cut in Mexico, potential stimulus in China, and caution from the US defined the week. 

Week of June 23–27 

Investors closely watching monetary policy, oil prices, and inflation. A week marked by rate adjustments, mixed economic signals, and easing geopolitical tensions 

This week brought key developments in monetary policy, economic growth, and geopolitics. Here’s a country-by-country summary of the most relevant updates: 

  • United States: Former President Trump announced a ceasefire between Iran and Israel, easing oil prices. Fed Chair Jerome Powell reaffirmed the likelihood of holding interest rates steady as tariff impacts are assessed. Q1 2025 GDP contracted by 0.5%, a deeper decline than expected, and consumer confidence fell again.  
  • Europe: The Eurozone continues to show lackluster growth, though Germany posted signs of a manufacturing rebound. In the UK, the composite PMI edged up slightly due to improved new orders. 
  • China: Citi raised its 2025 growth forecast to 5%. A new fiscal stimulus package worth approximately $70 billion is expected.
  • Brazil: The Central Bank signaled a pause in its tightening cycle to assess the cumulative impact of previous rate hikes. 
  • Mexico: Banxico cut the benchmark rate to 8%. Inflation rose to 4.51% year-over-year in the first half of June. The government issued $6.8 billion in debt maturing in 2032 and 2038. 

“Discipline is what separates an investor from a gambler.” – Peter Lynch 

KEY EVENTS TO WATCH 

  • July 1 – US ISM Manufacturing Index release  
  • July 4 – US markets closed in observance of Independence Day 

Monitor 

Posted in Weekly Summary
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