June 2025 Market Strategy
Bulls and bears caught in a limbo.
In my May 2025 Market Strategy, I noted that my base case of a cyclical deficit decline might be wrong in the face of continued strong gross federal spending in the US. This was potentially quite bullish, especially in combination with unproblematic inflation data and cautious institutional investor positioning. An inflation surge seems to be the only thing that can politically enforce spending cuts. Let’s check how the picture has evolved since then.
TLDR Summary
Bullish:
Continued fiscal deficit binge with unproblematic inflation data.
Cautious institutional investor positioning, esp. on US assets.
Robust economic growth signaled in traditional macro metrics and interest rates.
Risk premium to be earned from passing of the ‘Big Beautiful Bill’
Bearish:
Economic slowdown possibly foreshadowed in sharply weakening withheld tax receipts.
In spite of their arguably cautious positioning, institutional investors have low cash levels, little recession fears, little fear about an overheating of the AI theme and zero fear about a fiscal slowdown.
Retail investors keep demonstrating exuberance with heavy dip buying and outrageous prices and price performance of their most beloved assets. They likely won’t win forever.
The unresolved debt ceiling issue is stalling the supply of Treasury securities.
You help me whether this distills into a bullish or bearish overall view. ¯\_(ツ)_/¯