Over the past month, we have started to see a slight weakening in the U.S. growth outlook and specifically the employment picture. This week we will see the JOLTs (Job Openings and Labor Turnover Survey) report and NFP (Non-Farm Payroll) reports. Expectations for both are softening. We have also seen the weekly initial and continuing claims data weaken. The combination of lower job openings, slight increase in initial jobless claims, and the highest level of continuing claims since the post COVID-19 normalization in 2022 adds some growth concerns.
The markets will likely start to care more about the growth outlook and the consumer and a bit less about tariffs looking forward. A decline in the real economy and employment picture would be negative for equity markets that are priced for strong earnings growth, which would be unlikely with a harder economic landing.
The reconciliation bill is now with the U.S. Senate and though it is mildly pro-growth in 2026 due to frontloading of certain tax cuts it is a negative to growth in all other years. If tariffs are an implemented and sustained the fiscal picture would become firmly anti-growth. Don Schneider at Piper Sandler created the following chart based on the current version of the Big Beautiful Bill that will need to be signed by U.S. President Trump by July 4.
If we assume all of the tax policy in the bill is permanent the bill will still be deficit reducing in the long run on a current policy baseline pic.twitter.com/HkCdvp9v8o
— Donald Schneider (@DonFSchneider) May 30, 2025
This should combine to keep markets range bound and volatile in the coming months. We like the buffer ETFs in this environment and the ZJAN ETF provides about 10 per cent upside to December if we re wrong and protects about 13 per cent downside if a hard economic landing plays out this year.
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