Low-Volume, Low-Volatility Sessions: What the Macro Backdrop Is Really Telling Us

1. Quiet Tape, Muted Catalysts

Both the pre-open Globex trade and the U.S. afternoon session have been registering historically low
realised volatility and volume. GDP (-0.5 % q/q chained) and May’s personal-income/spending
update failed to move the needle, underscoring that headline eco-data are not the driver right now.

2. Disinflation Continues—But Eyes Turn to Tariffs

• CPI trend: May CPI slowed to 2.4 % Y/Y; consensus for the 15 July release
  (covering June) points to another step-down, confirming a gentle disinflation path.
• New inflation risk: The Fed’s June Monetary Policy Report highlights prospective
  MAGA tariffs as a potential upside shock to prices, despite the current cooling trend.

2a. PCE: Expected Uptick—But Why the Market Shrugged

May core PCE rose 0.2 % m/m and 2.7 % Y/Y, exactly in line with market expectations,
so the release landed as a non-event for risk assets.

Because the surprise index was effectively zero, Fed-funds futures barely budged and
S&P e-mini volumes stayed in the bottom decile of the past year. What matters now is the
trajectory, not the print—particularly once tariff effects begin to filter through later in Q3.

Importantly, the real-income backdrop remains constructive: real average hourly earnings gained
1.4 % Y/Y and real weekly earnings 1.5 %, so inflation-adjusted purchasing power is
still expanding.

Tomorrow’s BEA release on real wage consumption is likely to confirm this trend, which explains today’s
market apathy toward the PCE data. Still, elevated liquidity parked in money-market funds
($7.02 trn AUM) and tariff uncertainty keep the system in a strong-but-afraid mode:
the cash is ready, conviction is not.

3. Funding-Side Friction: 13-Week Bills Say “No Cut Yet”

Secondary-market yields on 13-week T-bills hover at ≈ 4.30 %, well above the
4.00 % – 4.05 % zone that typically precedes a 25 bp Fed ease. In short, the bill
market is not pricing a Powell pivot.

4. Fiscal Reality Check

Tariff revenue, even under aggressive assumptions, cannot plug the widening gap left by softer
personal-income-tax receipts. Inflation created by higher import duties would erode any nominal
gain, compounding the real deficit burden. The metaphorical 300 km/h train lacks brakes in the near term.

5. Liquidity & Behavioural Shifts

• Money-market funds: Total AUM rose $7.6 bn in the eight days to 25 June, pushing the
  aggregate to $7.02 trn—a ~1 % m/m and 2.4 % Y/Y climb.
• Personal saving: Despite a dip in May’s saving rate to 4.5 %, the absolute level—
  $1.01 trn—remains a ready spending war-chest once macro-uncertainty fades.

6. Market Implications

1. Directionally long bias persists—but conviction is low. Thin liquidity means
   outsized gap risk once a genuine catalyst appears.
2. Event path dependency: A softer-than-expected June CPI could spark a relief rally,
   yet any concrete tariff-implementation timeline would likely erase that bid.
3. Watch the front end: A decisive break of the 13-week bill toward 4 % would be the
   clearest signal the Fed is comfortable opening the rate-cut door.

Bottom Line

The market remains caught between current disinflation and future tariff-driven inflation risks,
all under the shadow of a widening fiscal gap. Until one narrative dominates, expect more
quiet-tape / fast-tape alternations rather than a sustainable trend.

US GDP (Q1 2025 – 3^rd estimate): reading the numbers

The Bureau of Economic Analysis (BEA) revised real GDP for January-March down to an annualised -0.5 %, versus the prior –0.2 % second estimate, yet the level is still +1.99 % above the same quarter a year ago. Gross National Product (GNP) fell more sharply because cross-border income flows swung lower.

GDP vs GNP — why the difference matters

GDP is the value of all goods and services produced inside U.S. borders.

GNP adjusts GDP by adding income that U.S. residents earn abroad and subtracting income that foreigners earn in the U.S.:

GNP = GDP + (income receipts from rest of world) − (income payments to rest of world)

Because those receipts and payments mostly reflect profits, interest and dividends, GNP is often a clearer gauge of how much output-derived cash actually accrues to U.S. residents. When receipts fall faster than payments—as in Q1 2025—GNP can contract even if the trade balance looks steady.

Headline metrics

Where the weakness came from

• Consumer spending: contribution cut to +0.09 ppt, mainly recreation and transport services.
• Exports: –0.11 ppt drag, led by royalties & business services.
• Imports: front-loaded goods kept the import line elevated.
• Government: –0.16 ppt as both federal and state outlays eased.

Why GNP shrank faster than GDP

• Income receipts from the rest of the world: –$91.6 bn q/q.
• Income payments to the rest of the world: –$54.6 bn.
• Net effect: roughly –$37 bn on GNP.

Three signals about the global cycle

1. Advanced-manufacturing exporters are feeling the chill from weaker foreign demand.
2. Partner economies are slowing faster, shown by softer U.S. imports.
3. Despite the dip, the U.S. still posts near-2 % y/y real growth—rare among G-7 peers.

Market takeaways

Bottom line

Q1’s negative print signals a synchronised global slowdown more than a U.S. recession. Domestic momentum is still positive y/y, suggesting equity indices can grind higher on thin volumes while fundamentals stay sound.