Q3 2025 Outlook

July 2025

Issue #7

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So much for a global recession (for now)!

THE BIG 3

Inflation Reloaded

Not everything this time!

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Global Game of Trade 

Winners, losers, and lightning quick pivots. 

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Policy Ping-Pong 

Huge deficits, tax confusion, and geopolitical tension.

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Inflation Reloaded

From noisy headlines to real signals.

If the first half of 2025 had a theme, it was “everyone’s yelling, few are right.” We started the year swinging between growth and slowdown fears, saw inflation cool off a bit, and now—surprise—it’s ticking up again.

But this isn’t the panic of 2022 all over again. This inflation bump is more wobbly than wild and not hitting everything at once. It’s sector-driven, uneven, and most importantly, relatively predictable for those watching the right signals.

We’ve cycled through a messy mix of misinformation. Although headline risk was ubiquitous over the last 6 months, growth drove consumption because the US consumer will buy things until it becomes impossible. With the recent extension of key tariff deadlines, we still haven’t seen the brunt of increased import costs. Prices will go up, but it will be a while before we know how much.

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Global Game of Trade

Tariffs didn’t end trade—they just complicated it. The US saw record imports to start the year, which bloated GDP numbers. Oddly, American corporations largely beat profit expectations amidst all the political theater. While U.S. tariff news stole the spotlight, the global economy kept moving—just in new directions. Countries like Germany, India, Belgium, and Australia picked up the slack, reshuffling supply chains and keeping trade humming. This created a considerable increase in growth, especially in a formerly stagnant European Union. Add in a weaker U.S. dollar (down 10.5% YTD), and global financial conditions have loosened up. That’s helped emerging markets and export-heavy economies keep growing—despite all the noise. No global meltdown. No collapse. Just smart adaptation. And for now, the world keeps spinning. If geopolitical tensions ease toward the end of the year, the odds of a global recession would be reduced to almost zero.

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Policy Ping-Pong

Welcome to the messy middle. Q3 is that weird part of the movie where you’re not sure what genre you’re watching. We’re past the trade tantrums of early 2025, but not quite at the regulatory and tax cut finale expected in Q4 or early next year.

What we are seeing:

• Campaign promises broken, sort of…

• Spending staying high

• Tax cuts extended

  
  

It’s a tug-of-war between fiscal noise and macro stability. The result? A lot of market uncertainty—and plenty of room for active managers to shine to find opportunities.

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The Bottom Line

There’s more risk on the board—but also more chances to win.  As the macro machine keeps grinding, and the policy plot thickens, we’re entering a second half that’s more complicated—but also more tradable. The key is not to get every trade or investment right. Headlines and policy will change without notice. You just need to stay diversified, stay invested, and don’t get greedy.

Any opinions are those of Alexander Leonida. The information contained in this document does not purport to be a complete description of the securities, markets, or developments referred to in this material. There is no assurance any of the trends mentioned will continue or forecasts will occur. The information has been obtained from sources considered to be reliable, but CFG does not guarantee that the foregoing material is accurate or complete. This newsletter: (a) is not an official transaction confirmation or account statement; (b) is not an offer, solicitation, or recommendation to transact in any security; and (c) may not be retransmitted to, or used by, any other party. Investment products are: Not deposits. Not FDIC or NCUA insured. Not guaranteed by the financial institution. Subject to risk. May lose value.