Unadorned Notes: June 24-30, 2025
Senate Advances $4.5T OBBB; Trump Pressures Fed on Rates; NATO Sets 5% Defense Target; U.S. Stocks Close at Record Highs; China Manufacturing Weak, Stimulus Likely
U.S. Politics, Policies, and Geopolitics
Senate Advances $4.5T OBBB: Senate Republicans advanced the “One Big, Beautiful Bill Act,” which extends 2017 tax cuts and enacts new spending cuts, but uses a novel accounting approach to ignore the $3.8T cost of making tax cuts permanent (Bloomberg, Axios, WSJ, 2025-06-30). CBO projects the Senate version will widen the deficit by $3.3T over 10 years, $0.5T more than the House version. The bill faces intra-GOP resistance over Medicaid cuts and deficit impact; two GOP senators (Paul, Tillis) opposed advancement, with Tillis announcing retirement after Trump threatened a primary challenge. If passed, this sets a precedent for future deficit expansion via reconciliation and weakens fiscal discipline constraints.
Trump Pressures Fed on Rates: U.S. President Donald Trump intensified his criticism of Federal Reserve Chair Jerome Powell, calling for his resignation and demanding interest rates be cut to 1%. Trump has made clear he will appoint a successor aligned with his views on aggressive monetary easing, as Powell’s term ends in May 2026. Market expectations for rate cuts have risen, reflecting both economic uncertainty and the likelihood of a more dovish Fed chair under a second Trump administration. Analysts caution that the Fed’s independence remains vital, and any perception of political interference could undermine credibility. The Fed has signaled caution on rate cuts due to inflation risks tied to Trump’s tariffs, with upcoming labor and inflation data seen as key to its near-term policy decisions.1
SCOTUS Limits Nationwide Injunctions: The Supreme Court ruled 6-3 to restrict federal judges’ ability to issue nationwide injunctions, a move that will allow the Trump administration to more easily implement contested executive orders (WSJ, Bloomberg, 2025-06-28). This ruling immediately impacts the administration’s ability to enforce policies on immigration, birthright citizenship, and other regulatory actions, reducing legal friction for executive branch initiatives.
U.S.-China Rare Earth Stalemate: U.S. and China announced a “framework” for rare earths and tech trade, but China’s Ministry of Commerce only confirmed a non-binding agreement to review export licenses under existing law (China Business Spotlight, Sinocism, Nikkei Asia, 2025-06-30). U.S. officials tout a “signed and sealed” deal, but Chinese rare earth magnet exports to the U.S. fell 93% YoY in May, and licensing remains slow. No “fast track” for U.S. deliveries as with the EU; U.S. automakers and defense remain exposed to supply disruptions. U.S. is threatening further chip-related export controls if rare earth flows do not resume.
NATO Sets 5% Defense Target: NATO members agreed to raise defense spending to 5% of GDP by 2035, up from the previous 2% target (U.S. State Dept, Bloomberg, 2025-06-28). European and Canadian defense procurement is expected to drive $21B+ in U.S. defense exports in 2024, with further upside as European rearmament accelerates. U.S. defense primes (e.g., Lockheed, RTX, Boeing) are positioned for multi-year order growth. European leaders are pushing for local procurement but lack capacity, likely increasing U.S. market share.
Russian Command and Influence Weaken: Putin’s removal and prosecution of senior generals (e.g., Popov) exposes fractures in military command; corruption cases have surged since the Ukraine war began, with $32.7B in assets seized since 2022 (Jamestown Foundation, 2025-06-30). Russia’s influence in the Middle East is waning as it cannot provide tangible support to Iran post-U.S. strikes, and is losing leverage in OPEC+ and Syria.
Israel-Iran Cease-Fire Holds: A cease-fire between Israel and Iran appeared to hold on Tuesday following 12 days of conflict, with both sides scaling back military actions. U.S. President Donald Trump claimed credit for ending the war and asserted, without corroboration, that U.S. airstrikes had destroyed Iran’s nuclear facilities; classified assessments indicate only limited damage. Iranian President Masoud Pezeshkian expressed readiness to resume nuclear negotiations, signaling potential diplomatic engagement. Despite isolated post-truce strikes, both governments appear committed to de-escalation, though they offered conflicting accounts of cease-fire violations. The truce has eased market tensions, with oil prices falling and U.S. equities rising for a second consecutive day.2
Economics, Finance, and Business
U.S. Consumer Sentiment, Spending Weaken: Conference Board Consumer Confidence Index fell 5.4 points in June to 93, erasing half of May’s gain; University of Michigan sentiment remains near historic lows (Axios, Bloomberg, 2025-06-27/30). Real personal spending fell 0.3% in May, with autos and goods leading the decline. Initial jobless claims fell to 236,000, but continuing claims rose to 1.97M, highest since Nov 2021. Labor market softening is now visible in both survey and administrative data, increasing downside risk to H2 consumption.
U.S. Housing Market Stalls: New home sales fell 13.7% MoM in May to a seasonally adjusted annual rate of 619,000, lowest since Oct 2024 (WSJ, Axios, 2025-06-27). Pending home sales and existing home sales remain near multi-year lows; home prices are rising at the slowest pace in two years. High mortgage rates and economic uncertainty are suppressing demand, with cancellation rates and cold feet elevated. No evidence of imminent recovery in housing activity.
Fed Signals September Rate Cut: Fed Chair Powell and key governors (Waller, Bowman) signal openness to rate cuts as soon as September, citing moderating inflation and weak Q1 GDP (-0.5% annualized, revised down) (Axios, Barron’s, 2025-06-27/30). Core PCE rose 0.2% MoM, 2.7% YoY in May; real disposable income fell 0.7% in May, first negative print since Aug 2024. Tariff pass-through to consumer prices remains limited due to inventory overhang and deal expectations, but Fed officials warn that persistent tariffs could force price hikes later in 2025. Market-implied probability of a July cut remains <20%; September cut is now base case.
Fed Moves to Ease Bank Leverage: The Fed board voted 5-2 to propose reducing the enhanced supplementary leverage ratio for GSIBs from 5% to 3.5–4.5%, potentially freeing $54–185B in capital (Bloomberg, 2025-06-26). This is expected to increase bank demand for Treasuries and improve market liquidity, but raises systemic risk per dissenting Fed governors and Sen. Warren.
U.S. Stocks Close at Record Highs: S&P 500 and Nasdaq closed Q2 at all-time highs (S&P: 6,173.07, Nasdaq: 20,273.46), with the S&P up 10% for the quarter and 5% YTD (WSJ, Barron’s, 2025-06-28/30). Market breadth has expanded: 70% of Russell 1000 and 66% of S&P 500 components are above 50-day MAs, and new highs outnumber new lows by wide margins. Financials and industrials are now participating, not just tech. The U.S. Dollar Index is down >10% YTD, its worst first half in four decades, providing a translation boost to U.S. multinationals’ earnings. This broadening rally reduces fragility but raises valuation risk (S&P 500 at 22x forward earnings).
Oracle Gains in AI Cloud: Oracle’s Cloud Infrastructure business is outpacing expectations, driven by major contracts with OpenAI and ByteDance, and rapid expansion in Malaysia and Texas (SemiAnalysis, 2025-06-30). Oracle forecasts $130B+ in new contracts over 12 months; CapEx ramp is confirmed by independent tracking of GB200/300 rack orders. U.S. hyperscaler CapEx for AI infrastructure is projected at $365B in 2025, with Oracle gaining share due to networking and cost advantages.
U.S.-China Trade Pressures Mount: Ocean shipping rates from China to the U.S. have dropped by more than 50% in June, with the Shanghai–U.S. West Coast route stabilizing near $2,500 per container after peaking at $6,000. The decline follows a tariff rollback by President Donald Trump from 145% to 30%, which temporarily spurred import activity. However, import volumes remain below expectations, as U.S. retailers had stockpiled goods ahead of tariff hikes, delaying the full impact on consumer prices. Companies such as Walmart have begun warning of price increases, and Federal Reserve Chair Jerome Powell anticipates tariff-driven inflation later in the summer. Analysts remain uncertain about future tariff policy, with a July 9 deadline approaching for broader duties, raising concerns over U.S. economic momentum and supply chain resilience.3
China Manufacturing Weak, Stimulus Likely: China’s official manufacturing PMI rose to 49.7 in June from 49.5 in May, marking a third consecutive month of contraction but showing modest improvement in new orders and purchasing activity. While domestic demand indicators improved slightly, export orders and employment remained weak, reflecting continued pressure from U.S. tariffs and a subdued global trade environment. Non-manufacturing activity edged up, driven by a rebound in construction, though services sectors such as travel and logistics declined. Business confidence weakened, and industrial profits fell in May, prompting calls for additional policy support to stabilize growth. Policymakers remain committed to long-term structural reforms, but analysts expect further fiscal stimulus to meet China’s 2025 growth target of around 5%.4