Refunds

Tariff refunds began in May and are likely to boost earnings and margins for consumer sectors.

We apologize for the delayed note this week, we returned to Colorado Sunday afternoon.

· Tariff revenues unexpectedly plunged and refunds appear to have begun, potentially boosting consumer-sector earnings and easing pressure on discretionary and staples companies.

· Small business conditions remain K-shaped: wage growth is still cooling, capital spending plans are weak, and small-bank lending remains tepid.

· Tariffs and energy shocks have had limited inflation impact; goods prices remain soft, Chinese deflation is a structural drag, and shelter inflation is expected to resume its downtrend.

· We expect the Warsh Fed to reduce reliance on forward guidance, with labor-market softness becoming the larger policy concern than inflation. The inflation breakeven curve strongly suggests energy has had no impact on inflation. The market has moved on, so should the Fed.