In the Loop – August 15, 2025

With new tariffs taking effect, growth is likely to slow and prices on affected goods to rise, leaving the Federal Reserve in the challenging position of managing inflation while the economy shows signs of cooling. While risks have increased, current data suggest a recession is not imminent, and we view market volatility — whether seasonal or driven by headlines — as a potential buying opportunity rather than a major cause for concern.

The sudden resignation of Federal Reserve Governor Adriana Kugler, four months before her term’s end in early 2026, has added fresh uncertainty to the monetary policy landscape. President Trump has nominated Stephen Miran, current Chair of the Council of Economic Advisors, to serve out her term, pending Senate confirmation, and speculation is building that Fed Governor Chris Waller — a Trump appointee and outspoken supporter of lower rates — could be tapped to replace Jerome Powell when his term as Fed Chair ends in May 2026. If Miran is confirmed before September, he will participate in the Fed’s remaining 2025 meetings and the January 2026 meeting, while Waller’s promotion could trigger another vacancy for the White House to fill. Altogether, the administration may appoint a new Fed Chair and two governors within the next year, potentially shifting the central bank toward a more dovish, rate-cut-friendly stance.

Corporate earnings point to continued U.S. economic resilience, though some consumer companies show weakness among lower-income households, with McDonald’s noting double-digit declines in visits from this group as they cut back on meals out. While tariffs will likely pressure these consumers further, their share of total spending is relatively small. With middle- and upper-income households benefiting from record equity values and net wealth, and absent major layoffs or a sharp market drop, overall spending should remain strong enough to sustain economic momentum.