Core Viewpoint - The Federal Reserve's current interest rate level is deemed appropriate to address ongoing uncertainties related to tariffs and inflation, significantly reducing market expectations for a rate cut in September [1][2]. Group 1: Federal Reserve's Decision - The Federal Open Market Committee (FOMC) decided to maintain the federal funds rate target range at 4.25% to 4.5%, with a vote of 9 to 2, marking a routine decision for the year [1]. - Two members, Christopher Waller and Michelle Bowman, opposed the decision, advocating for a 25 basis point cut, which is the first dissent since 1993 [1]. - Following Powell's remarks, market expectations for a September rate cut dropped from approximately 60% to a 50% chance [1]. Group 2: Economic Assessment - The Fed downgraded its economic outlook, stating that recent data indicates a slowdown in economic activity growth during the first half of the year, contrasting with previous assessments of robust expansion [1]. - The second quarter GDP showed an annualized growth of 3%, reversing a contraction of 0.5% in the previous quarter, largely due to businesses importing ahead of tariffs [2]. - Consumer spending has shown the weakest growth since the pandemic, with two consecutive quarters of low performance [2]. Group 3: Inflation and Labor Market - Inflation remains slightly elevated, with certain goods directly affected by tariffs, such as toys, clothing, and electronics, experiencing significant price increases [2]. - The unemployment rate slightly decreased to 4.1%, partly due to reduced labor supply from tightened immigration policies [2]. Group 4: Future Policy Outlook - Powell emphasized the need to observe data developments before making decisions regarding potential rate cuts, indicating a cautious approach [3]. - The FOMC's recent meeting did not provide substantial policy guidance, reflecting ongoing uncertainties in the economic landscape [3].

Group 1 - The U.S. has postponed the tariff deadline from July 9 to August 1 and has issued letters to fourteen countries regarding increased tariffs, particularly targeting Japan and South Korea [1][4] - The U.S. is applying extreme pressure on Japan and South Korea to make concessions, indicating a significant shift in policy compared to previous administrations [3][4] - The tariffs imposed on Japan and South Korea are punitive rather than basic, with a 25% tariff announced [4][6] Group 2 - The U.S. foreign policy has shifted focus from supporting Ukraine to addressing the Middle East situation, particularly after Israel's attack on Iran [9][12] - Following a call with Putin, the U.S. expressed dissatisfaction with the lack of progress in the Russia-Ukraine conflict, indicating a potential shift back to supporting Ukraine [10][12] - The U.S. has historically provided about 50% of Ukraine's weaponry during the conflict, highlighting its critical role in Ukraine's defense [19] Group 3 - The U.S. is considering further sanctions against Russia and has expressed dissatisfaction with Putin, indicating a potential increase in pressure on Russia [17][21] - The unpredictability of U.S. policy under the current administration has led to a decrease in credibility and reliability among both allies and adversaries [23][25] - The economic implications of the tariff policies may lead to a recession in the U.S., with the administration's actions contributing to economic uncertainty [29][41] Group 4 - The current administration has threatened the Federal Reserve's chairman regarding interest rate policies, indicating a push for lower rates despite economic instability [31][39] - The administration's insistence that tariffs do not impact inflation contradicts economic realities, complicating the Federal Reserve's decision-making [33][37] - The uncertainty surrounding tariffs is seen as a major obstacle to the Federal Reserve's ability to lower interest rates [39][41]

Group 1 - Berkshire Hathaway has net sold stocks for 10 consecutive quarters, holding cash assets of $347 billion as of the end of Q1 2025, indicating Warren Buffett's cautious stance on the U.S. stock market [2] - Buffett's statement at the 2025 annual meeting reflects a philosophy of not always being fully invested, suggesting he is currently fearful of the market [2] - The uncertainty in the U.S. economy, driven by policies since President Trump's administration, is perceived as a reason for Buffett's significant cash reserves, showcasing his keen insight into market conditions [2] Group 2 - Buffett's quote about knowing who is "naked" only after the tide goes out emphasizes the importance of being prepared before market downturns [3]

Investment Rating - The report maintains a neutral stance on the industry, indicating a cautious outlook on future performance [53]. Core Insights - The Federal Reserve has decided to keep interest rates unchanged in the range of 4.25%-4.5% while reducing the monthly limit for Treasury redemptions from $25 billion to $5 billion, maintaining a $35 billion reduction for MBS [3][19]. - Economic forecasts have been adjusted, with the GDP growth rate for 2025 revised down to 1.7%, a decrease of 0.4 percentage points, while inflation predictions for PCE and core PCE have been raised to 2.7% and 2.8% respectively [23][30]. - The market's risk appetite has shown signs of recovery following the Fed's announcement, with significant increases in major stock indices and a decline in 10-year Treasury yields [42]. Summary by Sections 1. Federal Reserve Meeting Highlights - The Fed's statement reflects a stable labor market and acknowledges slight inflation increases, with internal dissent indicating differing views on economic conditions [19][20]. - The Fed's flexibility in lowering interest rates is expected to increase, with potential cuts of 2-3 times in 2025, contingent on economic performance [6][33]. 2. Economic Forecast Adjustments - The Fed has lowered its GDP growth forecast for 2025-2027 and raised its inflation expectations, suggesting that the impact of Trump's policies on inflation may be temporary [23][30]. - The median federal funds rate forecast for 2025 remains at 3.4%, with a potential for a 50 basis point cut [23][30]. 3. Market Reactions - Following the Fed's announcement, the Dow Jones and Nasdaq indices rose by 0.92% and 1.41% respectively, while the 10-year Treasury yield fell below 4.3% [42]. - The dollar index has seen a slight decline, and gold prices have increased, indicating a shift in market sentiment [42].