Monetary policy and new tariffs dominated the week
The latest U.S. Federal Reserve (the Fed) minutes from the most recent Federal Open Market Committee meeting in mid-June gave us more colour on what we already suspected; policy-makers were split on what comes next. Most still expected a few rate cuts this year, but the tone remained hesitant. Some would pull the trigger as soon as July, while others saw no reason to move at all. The dividing line? Tariffs. There was broad agreement that higher tariffs will increase prices, but not much clarity on how long or by how much. For now, Fed chair Jerome Powell’s "wait-and-see" mode stays in effect.
Despite this uncertainty, markets have continued climbing since the last Fed meeting, feeding off weaker macro data and the usual “bad news is good news” trade. Two cuts are now priced in for 2025, but July is off the table. Oil has pulled back sharply, as tensions in the Middle East ease, and both hard and soft data have missed expectations. One consistent theme in the minutes: the Fed sees slower growth ahead. Whether they act on it any time soon remains to be seen.
Trump’s latest volley of tariff “adjustments” came with new letters sent to countries ranging from the Philippines to Moldova, a fresh round of percentages that left most traders yawning. The E.U. is still in negotiation mode, reportedly trying to avoid the dreaded letter altogether. Despite the noise, markets have largely tuned out the drama. The TACO trade (Trump always chickens out) hasn’t cracked yet. And for now, it seems the bar for market-moving trade headlines is getting higher.
Delta Air Lines surprised the market by reinstating its full-year earnings guidance, signalling confidence in travel demand heading into the second half of the year. The numbers narrowly beat revenue and earnings expectations, with cargo strength offsetting softer-than-expected passenger trends. Load factors and yield dipped a touch, but it was the updated guidance, not the second-quarter results, that drove the stock higher.
Delta guided well ahead of where the market was, which gave a lift to peers like United, American and even JetBlue. After a sluggish first half of the year for airline stocks, investors finally have something to chase. For a sector that’s been stuck in turbulence (forgive the pun) that’s saying something.
Looking ahead
Next week sees the beginning of the most exciting time of the quarter: earnings season. Look out for what will be investors’ main focus for this summer: the dreaded Q2 results and the guidance for the rest of the year.
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