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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.

//  by Tower Bridge Advisors

I Will Gladly Pay You Tuesday…
Inflation, trade wars, a growing fiscal debt burden, and geopolitical conflicts are serious concerns that have impacted investors this year. However, in spite of all the hand-wringing about inflation and tariffs, consumers around the world have continued to spend throughout the first half of this year, driving global GDP growth. Since GDP growth is driven mostly by consumer spending, consumer actions and intentions certainly matter, although patterns of spending have shifted away from big ticket items and toward more service-related outlays. The pre-buying splurge on goods ahead of tariffs earlier in the year appears to have dissipated as well. While consumers are buying less homes and cars, they are also eating less Cheerios, granola bars and soup.

The top 10% of earners continue to propel the U.S. economy, though the mix of consumption is changing somewhat. Rather than purchase a new home that has become less affordable, a week on a cruise ship may garner your spending dollars. In fact, cruise ship operators recently reported strong bookings growth amid record pricing dynamics. Meanwhile, in-store and online purchases for 18- to 24-year-olds fell 13% year-over-year between January and April while spending by older groups was still on the rise. “Buy-now-pay-later” (BNPL) continues to gain in popularity, except it is now being used for DoorDash deliveries and everyday groceries that are paid off over time. Paying for a burrito over four installments is becoming more commonplace. However, delinquencies in the BNPL space have been rising to the point that overdue payments will now be reported to credit agencies. If you are delinquent on your big salad, better pay up!

That’s All I Can Stands…
While a number of recent economic data points are backward-looking, consumer confidence indicators have started to decline, which can be a warning sign regarding future spending trends. Consumer confidence weakened in June, erasing almost half of May’s sharp gains. The decline was broad-based, with consumers’ assessments of their present situation and expectations for the future both contributing. Buying plans for electronics were down while dining out remained high among spending intentions in services. Vacation intentions were unchanged overall in June, though more consumers planned to travel abroad and less domestically. If unemployment ticks up, then confidence will worsen further and could portend a slowing economy.

On the home front, US purchases of new homes fell in May by the most in almost three years as sales incentives fell short of alleviating affordability constraints. Sales of new single-family homes decreased 13.7% to a 623,000 annualized rate last month, a seven-month low. The latest results and earnings reports show homebuilders are struggling to maintain their order books amid mortgage rates stuck near 7%, higher materials costs due to tariffs and a slowing labor market. It does not help that the median sales price for a new home increased 3% from a year ago to $426,600.

Strong to the Finish
The European economy has continued on a growth path, with GDP expanding at a steady rate, employment reaching a record-high, unemployment and labor market slack remaining low, and job vacancies decreasing. Inflation has continued to decline in Europe, while economic sentiment has improved. Industrial production did decrease recently, interrupting a period of stability, though retail sales and services demand have climbed. In April, the EU unemployment rate held steady at 5.9% for the fifth consecutive month, reflecting a persistently stable labor market. In the world’s second largest economy, China’s Premier Li Qiang said yesterday that he was confident the country could maintain a “relatively rapid” growth rate as it transitions from a manufacturing-led model to a consumer-driven one. China’s economy showed steady improvement in Q2 after 5.4% growth in Q1, although slower growth is expected ahead due to the ongoing trade battles with the U.S.

Federal Reserve Chair Powell told lawmakers this week that recent economic data would have likely justified continuing to lower interest rates if not for concerns that higher tariffs might derail the central bank’s yearslong fight to defeat inflation. Powell said little to tee up a rate cut next month, but did not rule one out. It seems more likely that officials will wait until September to see if tariff-driven price increases are milder than expected before resuming rate cuts. Futures markets indicate only a 25% probability of a rate cut at the July Fed meeting, while the odds of a September rate cut have risen to 70%. Across the pond, the European Central Bank and Swiss National Bank have both been in interest rate easing mode recently. Meanwhile, U.S. equity markets are positive so far this year and near all-time highs. Against a tumultuous backdrop, the 10-year yield has fallen from 4.6% over the past month toward 4.3%. The Fed will continue to serve up spinach most likely through September in the hopes of keeping the economy on a strong, low-inflation path through these stormy seas. Chairman Powell’s term ends next May and he will likely be replaced, so winning the inflation battle as his legacy is most likely top of mind.

Derek Jeter turns 51 today while Singer Ariana Grande turns 32 and Aubrey Plaza turns 41.

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: « 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.
Next Post: 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. »

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  • August 25, 2025 – The Fed’s shift in policy, as stated by Jerome Powell last Friday, moves away from a focus on inflation and more toward insuring full employment. Such a shift suggests more short-term rate cuts and a willingness to tolerate some inflation as long as it stays below 3%. A willingness to tolerate a bit more inflation may sound innocuous but it could lead to unanchored long-term inflation expectations and keep 10-year Treasury yields elevated. If so, the euphoria expressed in Friday’s market rally may have been a bit too exuberant.
  • August 21, 2025 – This Friday we will receive commentary from the Federal Reserve after its annual gathering in Jackson Hole, Wyoming. The central-bank gathering has sometimes been a venue for marking shifts in Fed policy. Last year Fed Chairman Powell used it to signal that rate cuts were coming, and followed through the next month. The Snake River, which runs through Jackson Hole, provides an apt backdrop for the Fed’s meeting where the waters can be turbulent and winding. In the meantime, technology stocks have retreated this week and a number of consumer-focused companies have provided both encouraging and uncertain signals.
  • August 18, 2025 – The noise of front-page news doesn’t seem to coincide with record stock prices. War, ICE raids, violent storms and tariffs may be the topics of the Sunday talk shows, but the stock market cares more about earnings and interest rates. Earnings are rising and interest rates are stable. Will that continue? Earnings growth should slow a bit as the full impact of tariffs hits. While the Fed Funds rates should start to decline this fall, markets will focus on changes in the 10-year Treasury yield more than the Fed Funds rate.
  • August 14, 2025 – The market is increasingly divided, with a strong AI-driven rally on one side and a weakening consumer economy on the other. This contradiction creates a significant risk of a sudden economic downturn or stagflation, as soaring tech valuations may be unsustainable without broader economic support.
  • August 11, 2025 – There is an expression that rationality requires separating the wheat from the chaff. In Wall Street, to be a successful investor, it is necessary to separate hype from reality. That is particularly important as speculative fever rises. Some of the hype is real; some is nonsense. Don’t simply follow consensus. As investors you invest in companies, not hype, not single products, hot today but cold as ice tomorrow. Think rationally and you will be a successful investor.
  • August 7, 2025 – Football is considered a game of inches. Consider the “Brotherly Shove,” popularized by the Philadelphia Eagles, which is a play used to gain very short yardage and advance down the field. In order to counter this offense, defensive opponents have employed various tactics, but without much success. Two consumer-focused companies, McDonalds and Disney, recently reported quarterly earnings, and are slugging it out on the field as consumer preferences change and these companies try to adapt.
  • August 4, 2025 – Confusing economic reports on GDP and the labor market can be decoded to show that growth in the first half of 2025 was muted while inflation was well contained before the full impact of tariffs. If those data trends continue, look for one to three 25-basis point rate cuts before the end of 2025. That outlook may change with subsequent data but it is increasingly clear that an economy that has proven so resilient may need a bit more help to offset the impact of tariffs and significantly lower population growth.
  • July 31, 2025 – The U.S. economy demonstrated a strong rebound in Q2 2025 with 3.0% GDP growth. Tech giants Microsoft and Meta significantly exceeded earnings expectations, fueled by the ongoing AI boom and robust cloud and digital advertising performance. While the current AI-driven market rally shows parallels to the dot-com era’s speculative growth, today’s tech giants exhibit stronger financial fundamentals than many during the earlier boom. Investors should balance the allure of high growth with valuation discipline and diversification to mitigate risks in this dynamic market.
  • July 28, 2025 – The world looks pretty healthy but rising speculation elevates our concern. When the amount of corporate money flowing into bitcoin is twice the amount raised in initial public offerings to date, that gets our attention. With that said the focus this week will be on earnings and a slew of economic data on inflation, interest rates, and employment, all of which can be market moving.
  • July 24, 2025 – Like the game of Go in China, or Igo in Japan, the evolving tariff negotiations between the U.S. and our trading partners are creating a constantly changing gameboard and continue to dominate the news cycle. Markets reacted positively yesterday to indications that Japan’s tariffs would be capped at 15%, less than the 25% expected, and a potential deal with the European Union. Tariffs are already having an impact on corporate earnings and outlooks, although equity markets continue to gain ground.

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