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WHEN THE RHETORIC HAS GONE TOO FAR

The attempted assassination of former President Trump is an exclamation point on the sad state of political discourse in the United States. Karen and I were having dinner with friends when every cell phone suddenly began receiving countless news updates on the attempted shooting. As you can imagine, our dinner conversation quickly shifted to the attempted shooting and the numerous sources of the political vitriol that embroils the country at this time.

From identity politics to each side extolling that the opposition is an existential threat to democracy and the American way of life, we have seen politics turn nasty. All my adult life I have been keenly interested in politics and have fond memories of watching election night returns and discussing the outcome with my dad. As an investor, I need to keep a finger on the pulse of politics because shifting power has a significant impact on tax policy and spending priorities. My wife endures watching debates and election news and has had the same lament for many years: “I am tired of every candidate telling me why their challenger is an epic failure or incompetent; why don’t they ever tell us what they are going to do to improve the country.” Such is the state of play.

For those who remember, there was a magic minute after the attacks on September 11, 2001, when the country came together. Rudy Giuliani was “America’s Mayor” and George W. Bush walked confidently to the pitcher’s mound in Yankee Stadium and fired a solid opening pitch to the cheers of the Bronx faithful. Then the solidarity frittered away. In the last several years political speech has become more hyperbolic and accusatory. Political adversaries have become enemies. Comparisons to some of our worst characters in history, such as Adolf Hitler, are the norm. Is it any surprise that we had the attempted killing of Steve Scalise and now President Trump? I have often wondered if the architects of this divisiveness ever pause to question if they have taken things just a little too far. I am concerned that the toothpaste is out of the tube and unless both sides have a significant change of strategy, our division will only become greater. I hope and pray for better, and we shall see what progresses from this point.

In the markets, the last two inflation reports have shown an improvement in inflation. Some are calling for a July cut, although, we still believe this is a low probability. If the July inflation report shows a continuing trend of declining inflation the probability of a rate cut becomes higher. With unemployment at 4.1%, declining inflation may provide the cover that the Fed needs to begin lowering the Fed Funds rate[1]. We continue to believe that Fed Chair Jerome Powell will risk higher unemployment to make sure that inflation is truly on a downward trajectory. The lessening of inflation for shelter is what is creating the buzz because this is a significant piece of the calculation. The Fed remains data-dependent and the next several months will provide clarity on the next move. Stay tuned.

[1] Source: Bloomberg

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