No Love Letters

Strong US job growth unexpectedly boosted Treasury yields, diminishing expectations of a July interest rate cut. Conversely, European rates trended downward due to potential ECB rate cuts and a proposed permanent EU joint debt instrument. The US passed the "One Big and Beautiful Bill Act," extending tax cuts and increasing spending, despite projected deficit increases. The bill's fiscal responsibility claims are disputed, masking the true cost through accounting manipulations. This act could create a future fiscal cliff, potentially impacting budget deficits significantly. Geopolitical tensions, including Azerbaijan-Russia conflict and US-Ukraine relations, add to market uncertainty. Strained EU-China relations, marked by trade disputes and export controls, further complicate the global economic outlook. Ongoing US-EU trade negotiations face a deadline, with potential tariffs looming if an agreement isn't reached. Trump's threat of further tariffs adds to the uncertainty, potentially impacting various countries. The overall economic landscape presents a complex and volatile picture for investors and policymakers alike.