Summary of Key Points from the Conference Call Industry Overview - The discussion primarily revolves around the **US economy**, focusing on inflation trends, trade policies, and Federal Reserve monetary policy. Core Insights and Arguments 1. **Inflation Trends**: - May's inflation data showed a softer-than-expected increase, with Core CPI rising only **0.13% m/m (2.8% y/y)**, significantly below expectations of **0.27%** and **0.30%** from Barclays and consensus respectively [2][4] - The overall CPI inflation was also soft at **0.08% m/m (2.3% y/y)**, influenced by declining gasoline prices [2][4] 2. **Trade Policy Impact**: - The US-China trade discussions have not made significant progress, with the current truce set to expire on **August 10**. The administration is considering restoring country-specific tariffs and increasing sectoral tariffs on autos [4][11] - Businesses are expected to pass through approximately **50%** of tariff costs to consumer prices, which could significantly impact retail margins [6][11] 3. **Federal Reserve's Stance**: - The FOMC is expected to maintain the current target range for the funds rate at **4.25-4.50%**, with only one rate cut anticipated this year and three in **2026** [17][31] - Updated projections are likely to reflect higher inflation and downgraded GDP growth for **2025**, with core PCE inflation expected at **3.1%** [18][31] 4. **Economic Growth Projections**: - The GDP growth forecast for the current quarter is projected at **1.2% q/q saar**, with consumer spending showing signs of strength despite inflationary pressures [25][31] - The unemployment rate is expected to rise to **4.5%** by **2025**, indicating a potential slowdown in the labor market [18][31] 5. **Consumer Sentiment and Spending**: - Recent consumer sentiment data showed improvement, with the current conditions index rising to **63.7** and expectations increasing to **58.4** [14][27] - Retail sales are anticipated to show weakness, with a forecasted decline of **1.0% m/m** due to falling vehicle sales and gasoline prices [15][31] Other Important but Overlooked Content - The **PPI** for final goods rose only **0.1% m/m (2.6% y/y)**, indicating a continued soft trajectory since March [3][4] - The **Treasury budget deficit** grew to **$316.0 billion** in May, highlighting ongoing fiscal challenges [27] - Initial jobless claims have remained elevated, indicating some deterioration in labor market conditions, with claims at **248k** for the week ending June 7 [13][27] This summary encapsulates the critical insights from the conference call, focusing on the economic outlook, inflation trends, trade policy implications, and the Federal Reserve's monetary policy stance.

Geopolitical Crisis & International Relations - The G7's effectiveness is questioned due to the president's early departure during a geopolitical crisis [2][3] - The US signals to Iran that it must either accept a deal to prevent nuclear weapon development or face potential military action from Israel and the US [4][5] - US officials estimate Iran is days away from assembling the fissile material needed for a nuclear bomb, but months away from delivering a weapon [8] - Israel views preventing Iran from acquiring nuclear weapons as an existential matter, while the US, though not seeing it as existential, is committed to preventing Iran from obtaining such weapons [9] - The US and Israel are closely aligned regarding Iran [10] US Foreign Policy & Power Dynamics - The president's early departure from the G7 is partly a power play, demonstrating his focus on urgent matters like Iran [11][12] - Trade is a lower priority for the US president compared to the Iran situation [12][13] - The US president prioritizes the Iran issue as an urgent matter [13] Military & Security - The Fordo nuclear installation is under consideration for potential military action by the US, requiring B2 bombers with 30,000-pound bombs [5] - Iran's defenses and proxies are weakened, making them unable to successfully strike Israel due to Israel's strong defenses [7]

Geopolitical Landscape & US Foreign Policy - President Trump abruptly cancelled meetings at the G7 summit, citing the need to address the ongoing conflict in the Middle East [1][2] - The US is considering its role in supporting Israel, weighing military intervention against diplomatic solutions [3][4] - President Trump stated he is seeking a definitive "end" to the conflict rather than a ceasefire [5] - German Chancellor indicated that complete destruction of Iranian nuclear program is on the agenda if Iran does not back down, which Israel cannot achieve alone [4] Trade Negotiations & International Relations - Limited tangible progress was made on the trade front at the G7 summit, despite numerous meetings with G7 and EU leaders [7] - President Trump expressed dissatisfaction with the EU's trade offers, deeming them unfair [8] - A potential trade deal with Japan is possible, but negotiations are expected to be challenging [8] - The German Chancellor anticipates a resolution to the tariff dispute with the US (EU) before the end of summer [9][10] - President Trump views the EU as economically competitive and potentially challenging to the United States [11] - The US may consider extending the July 9th deadline for trade negotiations with the EU if progress is being made [11][12][14]

Geopolitical Risks and Market Impact - The market is becoming more accustomed to geopolitical risks, with the S&P 500 typically falling around 6% for about three weeks after such events before recovering [17] - Iran's potential closure of the Strait of Hormuz is seen as a worst-case scenario, which could drive oil prices to $120 per barrel and negatively impact equity markets [18][19] - Increased geopolitical risk may require a larger escalation to significantly impact markets [18] Middle East Conflict and U S Involvement - President Trump left the G7 summit early, citing the need to be in Washington to address the Israel-Iran conflict, and called for the evacuation of Tehran [1][47][49] - There is speculation about greater U S involvement in the conflict, potentially deploying bigger bombs or taking a direct hand, which would contradict the Trump Doctrine of non-intervention [1][7] - Israel is determined to push on with its goals against Iran, demanding an end to Iranian nuclear and missile programs and regional influence [9][11] - The U S may have been blindsided by Israel's timing of attacks on Iran, leading to discomfort with the lack of U S control over developments [35][36] Oil Market Dynamics - Oil prices are reacting to headlines about the Middle East conflict, with potential for continued volatility [74][75] - The International Energy Agency (IEA) forecasts that Chinese crude oil demand will peak around 2027, and global crude oil demand will peak around 2030 [80][81] - A collision of two ships just outside the Strait of Hormuz is being monitored, though initial reports suggest it is not linked to the conflict [78] Central Bank Policies - Deutsche Bank projects one rate cut by the Federal Reserve (FED) in December [24][31] - The Bank of Japan (BOJ) held interest rates and implemented a new plan to slow the pace of bond market tapering, reducing the run rate of reductions from ¥400 billion to ¥200 billion Yen [89][90] - The BOJ increased the number of securities it is willing to lend out to the market, increasing repo operations to add more liquidity [91] Trade and Economic Outlook - Trade policy is considered extremely uncertain, hinging on whether Japan and the U S can reach a trade agreement before the July 9 deadline [93][94] - Trump expressed concern that imposing tougher sanctions on Russia would cost "billions and billions of dollars" [55] Aviation Industry - Airbus dominated the Paris Air Show with orders worth $17 billion from Saudi customers [56] - The aviation industry is experiencing strong demand and tight supply, with manufacturers facing production constraints [59][60][61] - Approximately half of the growth in the aviation sector is expected to come from Asia, particularly India, driven by the rising middle class [69] Technology and Defense - OpenAI has won a $200 million contract with the U S Defense Department to help the agency determine how to use artificial intelligence for administrative and security tasks [95][97]

President Trump meets with Canadian Prime Minister Mark Carney at G7 Summit. ...

Geopolitics & Geoeconomics - The Middle East conflict is overshadowing trade conversations and the G7 summit agenda [1][2] - The G7 summit is expected to be defined by geoeconomics and geopolitics [5] - Trade is a major focus, despite not being on the official agenda [5] G7 Summit Dynamics - There is concern about avoiding a repeat of the 2018 G7 summit where Donald Trump rejected the communique [4] - Expectations for US trade agreements at the summit have been scaled back [6] - A unified statement from the G7 nations on all fronts is unlikely due to disagreements [10] - The summit's remote location is intended to foster frank conversations and improve camaraderie [11] Canadian Perspective - Canada hopes the summit will proceed smoothly under Prime Minister Mark Carney [11] - The G7 location in Banff and Calgary is geographically wide, with the leaders gathered at a small, hard-to-reach resort [8][9] - Canada invited nations beyond the G7, including Narendra Modi, to attend [10]

Accessible version The Flow Show The Bros, the Base & the Billionaires Scores on the Doors: gold 27.7%, stocks 6.7%, govt bonds 6.1%, IG 5.8%, HY bonds 5.0%, cash 1.8%, commodities -1.7%, US dollar -8.9%, crypto -10.0%, oil -12.4% YTD. "Bro Billionaire" stocks*vs the Base stocks (Russell 2000, RHS) Source: BofA Global Investment Strategy, Bloomberg Trump election +45% since election -7% 1700 1900 2100 2300 2500 2700 2900 3100 3300 5000 6000 7000 8000 9000 10000 11000 12000 13000 Jun'24 Aug'24 Oct'24 Dec'24 ...