The first half of 2025 has been driven by headlines that have caused volatility in both the stock and bond markets. While tariff negotiations have commanded the most attention, we are now pivoting to the federal budget deficit, which feels like a perpetual headline over the last 15 years.

Currently, the Three Tactical Rules are a “flashing yellow light” - a roughly neutral rating which represents a slight downgrade.

The stock market sell-off appears to be signaling a recession. However, we believe the bond market disagrees.

The Fed could be ‘slower to lower,' while the Trend continues to rise, with an overly optimistic Crowd due to seasonality and post-election trends.

In Europe, the ECB stimulates a sluggish economy while in the UK, the problem is inflation. In contrast, the US responds to stronger growth.

Since our last update of the Three Tactical Rules on June 25, 2024, equity markets have retraced most of the rally from the spring. The change in market sentiment came abruptly, due to the labor market showing signs of weakness as the number of jobs available per unemployed worker fell to 1.2 and the unemployment rate rose to 4.3%. The recent market volatility has had a dramatic impact on our tactical rules.