Good morning, investors. It wouldn’t be 2025 if we weren’t covering mixed signals in the economic data, and today we’re unpacking why the two most-watched markets in the world can’t get on the same page.

Bond bears and stock bulls

The stock market and bond market are forecasting different scenarios for the US economy.

The former projects optimism — higher equity prices, earnings growth, broad enthusiasm — but the latter sees weakening growth. 

Apollo chief economist Torsten Slok highlighted this disconnect in research published this week. 

The bond market, Slok said, is pricing in Fed cuts with the expectation that the economy is stalling out. Meanwhile, cyclical stocks are outperforming defensive picks year-to-date, underscoring investors’ optimism for betting on economically-sensitive sectors.

Yields on the 10-year Treasury bond have climbed over the last week while the S&P 500 is up 1.12% in the same stretch and near a record high. 

“Either the equity analysts are too optimistic, or the economists are too pessimistic,” Slok said.

Strategists at Goldman Sachs and Bank of America have both recently raised the S&P 500 year-end price targets: 

• Bank of America: 6,300, up from 5,600

• Goldman Sachs: 6,600, up from 6,100

These upward revisions follow the banks’ downward revisions made after President Trump’s “Liberation Day” tariff rollout in April. That pessimism didn’t last, and while the White House still has to figure out more trade deals, forecasters have turned decidedly upbeat.

Traders on the prediction platform Kalshi, notably, have slashed their recession odds from nearly 70% at the start of May to 20% as of Wednesday. 

The cliché on Wall Street is that, relative to stocks, the bond market is the “adult in the room.” It doesn’t succumb to the same retail or meme-driven forces as equities, and it’s historically a more robust signal about the direction of the economy. 

Slok himself — an economist by training, rather than an equity strategist — has taken a more bearish view on the rest of 2025 compared to the stock teams raising their S&P 500 targets. 

In recent weeks, his team at Apollo has focused on the potentially stagflationary effects of tariffs, cracks in corporate sentiment, and how immigration restrictions could push consumer prices higher.  

“The bottom line is that we should see inflation move higher over the coming months,” Slok said. “That is what the consensus expects, what the Fed expects, and what we expect.”

The stock market, for its part, has not only rebounded sharply from its April lows but it’s effectively ignored President Trump’s latest tariff announcements. 

Updates on the trade war no longer jolt traders like they did a few months ago.

To Ed Yardeni, founder of Yardeni Research, traders are tuning out tariffs because they expect second-quarter earnings to bring good news. 

He expects stocks to rise on an easy earnings beat, given that second-quarter year-over-year earnings growth was cut from 8.5% at the start of the year to 3.7%.

Yardeni expects actual earnings growth at 7.6% for the quarter.

“The second-quarter earnings season will start next week and reveal who is right,” Slok said. “If earnings continue to be strong, the adverse effects of tariffs, as expected by economists, will prove to be incorrect.”

Market snapshot

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Elsewhere

❌ President Trump announced a 50% tariff on Brazil imports. It’s partly in retaliation for the ongoing prosecution of the country’s former president, Jair Bolsonaro. The new levy is an increase from the 10% rate announced in April, and Trump said the countries have a “very unfair” trade relationship. (CNBC)

📈 The Nasdaq, Nvidia and bitcoin hit record highs. Markets didn’t let trade war updates derail the momentum. Copper prices also pulled back from Tuesday’s historic rally. (Yahoo Finance)

🏦 The Fed released minutes from its June meeting. Most officials see rate cuts coming, but the committee remains mixed on when they will begin and how much cuts will happen. The pass-through effects of tariffs are still uncertain, in the Fed’s view, though more than one participant would be open to a cut as soon as July. (Reuters)

🥙 Americans are dining for cheaper. Consumers are increasingly skipping posh eateries for casual options, and choosing canned or frozen goods over imported ingredients. Households have tightened spending on groceries in recent months even as inflation has cooled. (Barron’s)

Rapid-fire

• Nvidia became the first company ever to reach a $4 trillion market capitalization (Interactive Brokers)

• Amazon’s Prime Day sales on its first day are down 41% compared to a year ago (Bloomberg)

• Kevin Hassett and Kevin Warsh are the front-runners to succeed Fed Chair Jerome Powell (WSJ)

• Merck is buying biotech firm Verona Pharma for $10 billion, its biggest acquisition since 2021 (Barron’s)

• Linda Yaccarino stepped down as CEO of X after two years in the role (CNBC)

• Wall Street’s legacy players are racing to embrace bitcoin as they realize it brings new revenue and clients (Pomp Letter)

• The next Fed Chair will have to overcome credibility issues before they even start the job (CNBC)

Last thing

About me

📰 I’m Phil Rosen, co-founder of Opening Bell Daily. I’ve published books, lived on three continents, and won awards for my journalism, which has appeared in Business Insider, Fortune, Yahoo Finance, Bloomberg and Inc. Magazine.

I write our flagship newsletter to prepare you for each trading day — unpacking markets, economic data and Wall Street with analysis you won’t find anywhere else.

Feedback? Reply to this email, ping me on X @philrosenn, or write me directly at [email protected].