Video Update - Our Small-Caps Are Surging Out the Gate

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Welcome to the Real Income Report for the week of June 25, 2025. As we enter this holiday-shortened week with the 4th of July approaching, expect a fair amount of news and noise. We have the tariff expiration/extension deadline next week. Canada and the United States are apparently back to talking, and we have secured the agreement with China to not blow each other's economies up, plus a fairly decent agreement in place with the United Kingdom. The president is indicating that we can talk, but if we cannot reach agreement, it does not matter—he will implement whichever tariffs he chooses. That is all there is to it. We will see how that plays out. There probably will not be much movement this week, but next week it starts to dominate the news.

This week's big story will be the big, beautiful bill. Tons of last-minute changes are being made. It has advanced to the floor and will be open for debate. It will be everywhere—you will not be able to turn around without hearing discussions of this bill.

Economic Outlook

The economy currently has a soft patch. Concerns about the future surrounding tariff uncertainty are keeping CapEx decisions on the sideline. For at least the next quarter, we will have tariff-related uncertainty impacting the economy. The hard numbers themselves (jobs and spending) are not awful, but uncertainty levels are ridiculously high.

The thing to remember is there is lots of potential good news on the other side of this. If tariffs come in about where we think they will, you are looking at being in the middle of the bell curve we discuss regularly. All the bad, all the good in the middle: a 1% to 1.5% hit to GDP, a 1.5% to 2% pop in inflation (temporary, easing out next year). Then there are potential growth drivers on the other side that will impact every aspect of our portfolio.

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