Welcome to this market and economic update. We cover the latest on tariffs, the national debt, interest rates, and what they mean for long-term investors.
Since last year’s tariff announcements, global trade has been a major source of uncertainty. A Supreme Court ruling later struck down a large portion of those tariffs as unlawful. Markets generally welcomed the news.
Companies became eligible for refunds. U.S. Customs and Border Protection has accepted $129 billion in claims. Treasury data shows refunds have exceeded new tariff collections since May, with nearly $50 billion returned in June alone.
These payments boost balance sheets, but they largely reverse cash businesses already paid. Many firms still face tariffs under other rules, so the trade picture remains complex.
The refunds have added short-term pressure to the federal budget. The deficit already stands near $1.8 trillion with the fiscal year running through September. The CBO projects a full-year deficit of about $2.1 trillion.
National debt has now crossed $40 trillion. Deficits have been the norm: since 1970 the government has run a deficit in all but five years. Balanced portfolios still performed well across that stretch. Some of the largest deficit years even lined up with market bottoms. Debt creates real long-term challenges (especially around Social Security and Medicare), but investing based solely on deficit headlines has historically been counterproductive.
Rising debt helps push long-term rates higher. Rates have climbed to multi-decade highs, raising borrowing costs, yet they remain well below the levels of the 1980s and 1990s. Treasury buybacks are one tool being used to help manage the range. Higher rates also create opportunities in bonds and income-focused assets for portfolios positioned for this environment.
Tariffs, debt, and rates may draw heavier attention heading into the November midterms. That makes it especially important not to let headlines drive portfolio decisions.
We hope these perspectives are useful. If you’d like to discuss how tariffs, the deficit, interest rates, or the current environment fit your portfolio or plan, reach out anytime. We look forward to speaking with you.