Hello readers,

The mini “altseason” we saw in June/July has lost some momentum due to a hawkish Fed and weakening labor market data.

The critical question:

Is this a healthy pullback before the next leg up? Or the start of a more structural shift in the market?

This week, we break down the recent economic data and what it means moving forward.

Disclaimer: Views expressed are the author’s personal views and should not be relied upon as investment advice.

Let’s go.

Economic Data & Fed Policy

Trump got what he wanted with the Big Beautiful Bill and the initial tariff deals. Now all eyes turn to the Fed and monetary policy.

Inflation

Last week, we got the PCE data (the Fed’s preferred metric) for June. It came in at 2.8%, up .3% from May. The market was expecting 2.7%.

It’s become clear that inflation is proving to be somewhat sticky. We can see below that the increase is coming mainly from goods (dark blue) — an indication that the tariffs are driving higher inflation.

When Powell was asked last week about whether he was willing to “look through” tariff-related inflation as a one-time price adjustment, he responded that “by not hiking rates right now, we are already there.”

Sounds like he’s still worried about inflation.

PMI Data

We also received the June PMI data last week, which gives us a view into the sentiment of supply chain managers.

The takeaway?

• Manufacturing PMI (blue line) is still in contraction territory. The reading of 48 for June was weaker than the expected 49.5.

• Services PMI (red line) is now in expansion territory. The reading of 50.8 was in line with the market expectation.

We want to see both indices move firmly into expansion (above 50) to confirm a new business cycle, which historically coincides with “altseason.”

Labor Market