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July 10, 2025 – Professional dodgeball exists in the form of the National Dodgeball League. The NDL was founded in 2004 and is the only professional dodgeball league in the US, sporting 24 professional teams. Investors, corporate management teams and our trading partners may feel like they are playing dodgeball this year due to shifting tariff policies. Market volatility has indeed been above average in the first half of 2025. So far, we have dodged a major economic slowdown, job losses or significant inflationary pressures from tariffs, although the second half of 2025 could witness a bounce in these metrics.

//  by Tower Bridge Advisors

Did We Dodge DOGE?
The five D’s of dodgeball, as famously quoted in the movie “Dodgeball: A True Underdog Story,” are Dodge, Duck, Dip, Dive, and Dodge again. These are the fundamental movements players use to avoid being hit by a thrown ball. In dodgeball, you win by not dropping your ball or by catching a ball thrown by the opposing team. We have experienced some of these D’s so far this year in the economy and financial markets. While first quarter GDP posted a slightly negative number due to higher imports (a result of dodging tariffs), we have so far avoided significant inflationary pressures and a recession. Financial markets took a dip and dive in March and April, but have rebounded to new highs. Major DOGE cuts have largely been ducked in the passage of the latest tax bill.

Dodgeball is a zero-sum game. The broader economy is often characterized by positive-sum interactions, where innovation, trade, and increased productivity can create wealth and benefits for all participants. The concept of zero-sum thinking can be problematic if it leads to the belief that economic growth is always a competition where some must lose for others to win. The White House said on Tuesday that it would be implementing a 50% tariff on copper, causing copper futures to jump over 17% this week. The administration also threatened a 200% tariff on pharmaceutical imports. Semiconductor tariffs are also in the works. Markets have been shrugging off the latest tariff pronouncements, but eventually this could begin to bite earnings. Many companies are indicating that they will absorb most of the tariff costs, though some will be passed on in the form of higher prices. How much remains to be seen.

Originally, DOGE (Department of Government Efficiency) cuts were targeted at about $2 trillion out of a $7 trillion federal budget. That was scaled back to $1 trillion, and looks to be closer to about $190 billion that will be finally realized. The “One Big, Beautiful Bill,” also known as a rescissions package, includes $9.4 billion in cuts, with a significant portion attributed to initiatives identified by DOGE. These cuts aim to eliminate waste, fraud, and abuse in the federal government. In total, DOGE cuts amount to about 2.7% of the Federal budget, much less than originally proposed.

The Dismal Science Versus Perpetual Optimists
The consensus forecast among economists suggests that growth will slow down over the coming quarters as higher tariffs weigh on earnings, capital spending, and consumer spending trends. The consensus forecast among stock analysts suggest earnings acceleration over the coming quarters. These two views are inconsistent. We will receive more color from companies shortly as earnings season gets underway, regarding how these competing forecasts may resolve. The outcome is probably somewhere in between the top-down economist views and bottom-up analyst forecasts.

S&P 500 earnings are expected to increase 5.0% in the second quarter over the prior year, down from 13.3% in Q1. Revenue growth is expected to slow to 4.2% from 4.9% in Q1. Six of the eleven S&P 500 sectors are expected to deliver earnings growth in Q2, led by Communications Services and Technology. The Energy sector is expected to be the biggest drag on earnings growth due to weakness in the underlying commodities. Looking ahead, earnings are expected to increase 6% in Q3 and 7% in Q4. For all of 2025, earnings are expected to increase by about 9%. That would be a healthy outcome if realized, but we are cautious.

Fed Up with the Fed
A majority of Federal Reserve officials at their meeting last month expected they would be able to resume interest rate cuts this year, but only two voiced support for a rate cut as soon as July. Officials who believed lower rates would be appropriate later this year thought those moves could be justified by a weaker labor market or more modest (and temporary) inflation pressures from tariffs. But the minutes noted that a meaningful minority of officials thought inflation had not made enough progress toward the Fed’s 2% goal to justify lowering rates, even before any larger effects from tariffs become evident in the months ahead. The White House has been pressuring Fed Chairman Powell to cut interest rates further, but to no avail thus far.

The S&P500 and Nasdaq are both up about 6% this year despite all of the bobbing and weaving in markets and interest rates. Against a tumultuous backdrop, the 10-year Treasury yield has traded in a range of 4.0-4.8% over the past six months, and now sits at 4.4%. While revenue from tariffs has exceeded $80 billion so far this year, there are unintended consequences from all of this tariff upheaval. For instance, a 10% tariff on Costa Rica was imposed in April. That could cause a major problem because all of the baseballs used by Major League Baseball (over one million per year) are made in Costa Rica. That alone makes this trade issue worth solving amicably! More progress is needed on trade and tariffs before this gets resolved, meaning risk for second half earnings. For now, we will dodge, duck, dip, dive, and dodge again, and keep our eye on the ball for longer-term investment opportunities.

Sofia Vergara turns 53 today while Singer Jessica Simpson turns 45. Also, Philadelphia native Jeff Bergman, who voiced Daffy Duck along with Mel Blanc, turns 65 today. That’s all folks.

Christopher Crooks, CFA®, CFP® 610-260-2219

Tower Bridge Advisors manages over $1.3 Billion for individuals, families and select institutions with $1 Million or more of investable assets. We build portfolios of individual securities customized for each client's specific goals and objectives. Contact Nick Filippo (610-260-2222, nfilippo@towerbridgeadvisors.com) to learn more or to set up a complimentary portfolio review.

# – This security is owned by the author of this report or accounts under his management at Tower Bridge Advisors.

Additional information on companies in this report is available on request. This report is not a complete analysis of every material fact representing company, industry or security mentioned herein. This firm or its officers, stockholders, employees and clients, in the normal course of business, may have or acquire a position including options, if any, in the securities mentioned. This communication shall not be deemed to constitute an offer, or solicitation on our part with respect to the sale or purchase of any securities. The information above has been obtained from sources believed reliable, but is not necessarily complete and is not guaranteed. This report is prepared for general information only. It does not have regard to the specific investment objectives, financial situation or the particular needs of any specific person who may receive this report. Investors should seek financial advice regarding the appropriateness of investing in any securities or investment strategies discussed in this report and should understand that statements regarding future prospects may not be realized. Opinions are subject to change without notice.

Filed Under: Market Commentary

Previous Post: « July 7, 2025 – Treasury Secretary Bessent talks of his 3-3-3 goals, 3% growth, 3% inflation and a reduction of the deficit-to-GDP ratio from over 6 to just 3. Those are mighty goals. The passage of the reconciliation bill may make short-term movement in the right direction but the ongoing buildup of debt may make reaching those long-term goals difficult.

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  • July 10, 2025 – Professional dodgeball exists in the form of the National Dodgeball League. The NDL was founded in 2004 and is the only professional dodgeball league in the US, sporting 24 professional teams. Investors, corporate management teams and our trading partners may feel like they are playing dodgeball this year due to shifting tariff policies. Market volatility has indeed been above average in the first half of 2025. So far, we have dodged a major economic slowdown, job losses or significant inflationary pressures from tariffs, although the second half of 2025 could witness a bounce in these metrics.
  • July 7, 2025 – Treasury Secretary Bessent talks of his 3-3-3 goals, 3% growth, 3% inflation and a reduction of the deficit-to-GDP ratio from over 6 to just 3. Those are mighty goals. The passage of the reconciliation bill may make short-term movement in the right direction but the ongoing buildup of debt may make reaching those long-term goals difficult.
  • July 3, 2025 – The second quarter of 2025 delivered a stellar performance for U.S. equities, with impressive gains across major indices driven by strong corporate earnings, AI enthusiasm, and eased trade tensions. Despite this rally, the market successfully navigated challenges including early tariff anxieties, signs of consumer stress, and geopolitical uncertainties. Looking ahead, investors are keenly watching the “One Big Beautiful Bill Act” and its potential impact on interest rates, inflation, and corporate profitability.
  • June 30, 2025 – Trump’s big beautiful bill is headed for the finish line. It isn’t done yet and likely will see further changes before it reaches his desk. As the administration buys the votes necessary for its approval, expect the impact on future deficits to rise. With that said, the bill will help to accelerate near-term growth. Second quarter earnings reports are just a couple of weeks away and they should be good. However, unlike Q1 when skepticism abounded, this time optimism is high. July is usually a good month for stocks but the sharp April-June rally may mute the pace of further gains.
  • June 26, 2025 – Labubu dolls are hard to get these days. These dolls are prized by children in China, along with some celebrity admirers such as David Beckham and Rihanna. The grimacing, elvish-looking creatures come in “blind boxes” that keep buyers in suspense over which one they might get, but can take weeks to acquire. They sell for as little as $20, but a rare variety recently sold at auction for $150,000. In spite of all the hand-wringing about inflation and tariffs, consumers around the globe continue to spend. However, patterns of spending have definitely shifted.
  • June 23, 2025 – Saturday’s bombing of Iran’s nuclear sites was shocking news but financial markets are taking the news in stride at least until they can assess the Iranian response. Economically, little has changed so far. The one elevated risk would be an attempted blockage of the Strait of Hormuz. While possible, that would be a very dangerous escalation that would evoke a powerful response. Markets, at least for now, place low odds of that happening. Thus, the economic impact of the raid so far is marginal and markets remain calm.
  • June 16, 2025 – While many in Congress fret that the reconciliation bill now before the Senate raises deficits and ultimately leads to economic disaster if left unchecked in the future, the focus will be on now. That means lower taxes, faster growth and higher earnings in the short-run as long as the bond market doesn’t rebel. Only a true crisis is likely to elicit fiscal austerity. That won’t happen before the current bill, slightly modified, will pass. Wall Street will embrace it because it always embraces stimulative policy, at least until the side effects kick in. Markets are starting to replace complacency with euphoria. That can last many months. But as we learned from the SPAC debacle in 2021, it won’t last forever.
  • June 12, 2025 – Despite a resilient stock market grinding near all-time highs, a fresh wave of geopolitical risk and fiscal policy uncertainty is creating headwinds. A chorus of Wall Street’s most respected investors is sounding the alarm, warning of dangerously high valuations, an unsustainable U.S. debt burden, and the rising probability of an economic slowdown.
  • June 9, 2025 – This week the focus will be on trade negotiations with China and the progress getting the Big Beautiful Bill on the President’s desk. The former is likely to be complicated and slow moving, but any movement in the right direction should keep investors happy. As for the legislation, it will be inflationary and worrisome long-term if one focuses on future debt service requirements. But this market has heard wolf cried too often to care until either interest rates spike higher or the dollar comes under renewed attack.
  • June 5, 2025 – The Old Faithful Geyser in Yellowstone National Park erupts regularly, but not on an exact schedule. Considering the most recent 100 eruptions, the average time between eruptions ranged from 55 minutes to over 2 hours. Likewise, inflation and employment data can cause ebbs and flows in the bond market, creating volatility for investors. Economic data are currently coming in mixed, mostly related to changing tariff policy. Meanwhile, equity markets are slightly positive so far this year, and only off about 3% from all-time highs.

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