Hedgie's Market Edge - June 16, 2025

🦔 Welcome back to another week of market analysis! This week brought us some fascinating contradictions that I think tell a bigger story about where we're headed. The NY Fed's Empire State Manufacturing Survey showed current weakness but surprising optimism about the future, while car prices hit new records that highlight persistent inflation challenges. Meanwhile, the economic fundamentals continue showing resilience despite all the uncertainty swirling around trade policy and geopolitics.

I want to walk you through what these mixed signals mean for your investments and why I think we're at an inflection point where the next few months could set the tone for the rest of 2025.

MANUFACTURING SHOWS SPLIT PERSONALITY

The Empire State Manufacturing Survey that dropped this week perfectly captures the economic moment we're living through. Current conditions are getting hammered, but manufacturers are more optimistic about the future than they've been since the pandemic recovery.

June Manufacturing Snapshot:

Current Reality:
• General Business Index: -16.0 (much worse than -6.0 expected)
• New Orders: -14.2 (dropped 21+ points)
• Shipments: -7.2 
• Input Costs: 46.8 (biggest drop in almost 2 years)

Future Expectations (6 months out):
• Business Conditions: Jumped 23 points (biggest gain in nearly 5 years)
• Orders & Shipments: Sharp rebound expected
• Companies ready to spend once uncertainty clears

This data tells me companies are essentially in a holding pattern. They're not placing orders or making investments right now because they don't know what tariff rates they'll face or what the final trade deals will look like. But that massive 23-point jump in future expectations suggests there's serious pent-up demand waiting to be unleashed.

The price dynamics are particularly interesting. Input costs are falling fast, but companies are still raising their output prices to the second-highest level since early 2023. This means businesses are finally able to pass through costs they've been absorbing, which could keep inflation pressures elevated even as some commodity prices moderate.

CAR PRICES HIGHLIGHT STICKY INFLATION REALITY

Speaking of inflation pressures, the latest car pricing data really drives home why the Fed's job remains challenging. Average new car prices hit $48,700 in April, just $1,200 below the all-time high from November 2022.