By Kyle Tetting
Summer in Wisconsin tends to start with big shifts. Cooler weather makes way to sun and warmth as kids finish school and the golf courses, parks and festival grounds finally start filling. I know my own children are excited to get on with summer activities, even as they stare down a few more days of school.
For investors, all that seasonal activity tends to mean calmer markets, though this summer carries unresolved questions that might shift the pattern.
Tariffs
U.S. debt downgrade
On its surface, the downgrade itself isn’t terribly consequential, yet. The biggest concerns relate to borrowing costs, but interest rates are a function of supply and demand. With much of the developed world offering lower interest rates on sovereign debt and worse financial stability, considerable demand remains for U.S. Treasury bonds. Of greater concern are the policy decisions leading to any downgrade, though no singular action resulted in Moody’s decision.
Weighing heavily on investors’ minds are the on-again-off-again tariffs. Recent tariff volleys aimed at the European Union for June have been delayed to July. Investors celebrated news of the delay, but each successive tariff and subsequent postponement seems only to leave investors where they started.
With tariff pauses set to expire across much of the summer and much work still to be done, I’m erring more toward the cautious side of cautious optimism. Near-term uncertainty always urges caution and only more so because current stock market prices seem less reflective of the ill-effects of disrupted global trade.
Politics
Beyond tariffs, policymakers seem eager to make progress on the “One Big Beautiful Bill Act of 2025.” The fancifully monikered H.R. 1 is welcomed by many for the extension of the tax rates in the Tax Cuts and Jobs Act of 2017 as well as other policy changes related to taxes and spending.
With the Senate ready to take red pens to the bill that passed the House, we may need to wait to know the economic impact. Of note, the bill has been criticized for adding to the federal debt. So, it’s no coincidence that Moody’s became the last of the three major credit rating agencies to downgrade U.S. credit. Debt concerns could delay passage of the bill into summer. The White House has set a symbolic deadline of 4th of July.
With much politicking on tap, a typically quiet stretch might feel more frenetic this summer. Such spells aren’t unheard of, but the bulk of the underlying uncertainty feels more political than usual. I’m happy the conversation has shifted from inflation – even if prices remain elevated and the rate of change remains above the Fed’s target. But I’ll be happier to get back to investment fundamentals.
Balance
There will always be new information to adjust to and headlines that distract. But stock markets are driven by the ability of businesses to generate earnings and by our expectations for interest rates. With new technologies and innovation, the optimistic part of “cautious optimism” is as optimistic as ever – even if we need to get past caution to get there.
As we stare down a summer filled with more questions than answers, we should prepare for potential volatility and risk – as we always do. We should assess the appropriateness of our investment balance as our plan for what may come instead of our response to more uncertainty.