Vital Statistics:
Stocks are higher this morning on optimism over a trade bill with Canada. Bonds and MBS are up.
The holiday-shortened week ahead will be dominated by the jobs report on Thursday. Jerome Powell will be speaking tomorrow and we will also get ISM data. Markets will be closed on Friday for the 4th of July.
Consumer sentiment improved in June, according to the University of Michigan Consumer Sentiment Survey. Sentiment improved by 16% as tariff based shortages and inflation has not yet materialized. “Consumer sentiment surged 16% from May in its first increase in six months—confirming the mid-month reading—but remains well below the post-election bounce seen in December 2024. The improvement was broadbased across numerous facets of the economy, with expectations for personal finances and business conditions climbing about 20% or more. Despite June’s gains, however, sentiment remains about 18% below December 2024, right after the election; consumer views are still broadly consistent with an economic slowdown and an increase in inflation to come. Consumers continue to be concerned about the potential impact of tariffs, but at this time they do not appear to be connecting developments in the Middle East with the economy.”
Year-ahead inflation expectations fell from 6.6% to 5.0%, while longer-term expectations fell from 4.2% to 4.0%. Note that this long-term expectation is way different than market-based indicators. The 10 year Treasury Inflation Protected Securities (TIPS) breakeven yield is 2.3%
The Atlanta Fed’s GDP Now Model now sees Q2 GDP rising 2.9%, after hitting 3.4% in the mid-June estimate.
Canada has agreed to withdraw its proposed digital services tax, which restarted talks which had been stalled. Trump and the Canadian Prime Minister spoke on Sunday and said that they hoped to have an agreement by 7/21.
