To The Moon

US consumer and producer inflation reports have been out since Tue, 15 Jul 2025.

At the same time, the Top 6 US banks have also released their Q2 2025 earnings since Tuesday as well.

Time to take stock and make sense of where US market might be heading in the remaining 2 weeks of July 2025, supposedly one of US market, best performing months.

Consumer Price Index (CPI).

US’s June 2025 Consumer Price Index (CPI) report, released on Tue, 15 Jul 2025, with its subtle shifts, reveals how tariffs are quietly reshaping consumer prices, particularly in sectors heavily reliant on imports.

• Headline inflation saw a rise of +0.3% MoM, from the previous month (0.1%), largely aligned with expectations.

• Annual inflation accelerated to +2.7% YoY, from May’s 2.4%, marking its highest level since February 2025.

• Core inflation, however, came in slightly below expectations at +0.2% MoM, from May’s 0.1%.

• On a yearly basis, core inflation was +2.9% YoY, from May’s 2.8%, just shy of the 3% banding.

Important Note:

At the start of 2025, US effective tariff rate was about 2.4%.

With Trump’s “reprieved” reciprocal tariff of 10% (effective since April 2025), effective tariff rate has steadily increased to around 8%–9%.

US trade deals inked so far are 10% and more (eg. Indonesia tariff is 17%), each new tariff will add pressure on businesses, making it harder for them to keep up and forcing them to adjust their strategies.

For June 2025, Trump has “boasted” that US customs collected over $27 billion in tariffs, a sum is 3x 2024’s $7.9 billion.

This surge underscores the significant challenges businesses face from rising input prices, particularly in textiles, metals and food products.

In fact, the effective tariff rate may increase further, potentially reaching approximately 18% on 01 Aug 2025, driven by:

• Trump’s imposed 50% hike on copper.

• Trump’s unilateral reciprocal increases for countries without trade deals.

The effective rate (will likely) lag behind the announcements for 2 - 3 months due to shipping and payment delays.

Ultimately, JP Morgan expect the effective tariff rate to  settle between 10% to 15% as further negotiations and trade deals unfold.

While this is “good” news for the Trump administration, it could not be said so for US businesses.

And definitely not for US consumers as they face rising costs of living and little to no medical aid that has been cut from Trump’s tax budget.

Producer Price Index (PPI).

The Producer Price Index (PPI) for June 2025 was unchanged (0.0% MoM) from May 2025, on a seasonally adjusted basis, reflecting a stabilizing trend in producer costs.

On an annual basis, producer prices were up +2.3% vs May’s upwards revised +2.7% YoY.

Core PPI for June 2025 was also unchanged (0.0% MoM) from May 2025.

Annually, core PPI was +2.6% YoY vs Wall Street estimates of 2.7 vs May’s 3.2%.

While it may appear that manufacturer’s inflation is stabilizing, a closer examination reveals a different reality.

According to Comerica Bank, Chief economist, Bill Adams:

• Tariffs are raising prices of manufactured goods, but wobbly demand kept broader inflation contained in June 2025.

Another reason offered by RSM US, Chief economist, Joe Brusuelas:

• The June 2025 PPI report is a “classic head fake”.

• The overall index was distorted by a -2.7% decline in airline passenger services, a likely consequence of global travelers pulled back their visits to the US.

• Travel accommodation services prices (hotels and motels) sank -4.1%.

Lastly, PPI wholesale report does not capture the cost of imports as well as the CPI report, that has registered a sharper increase.

Q2 Earnings Season.

This week officially kicks off US companies’ Q2 2025 earnings ‘reporting’ season.

For the 38 S&P 500 companies that have already reported Q2 results:

• Their total earnings are up +8.3% YoY, compared to the same time last year.

• Revenues are up +4.8% YoY.

• About 84% beat earnings estimates, and nearly 82% beat revenue estimates.

As for the Finance sector:

• 35.6% of the S&P 500’s total market value has reported Q2 results.

• Earnings are up +13.2% from a year ago, with revenues rising +3.4%.

• All companies beat earnings estimates, and 84.6% beat revenue forecasts.

US major banks that have released their Q2 2025 earnings includes:

• JP Morgan.

• Wells Fargo.

• Citibank.

• Bank of America.

• Morgan Stanley.

• Goldman Sachs.

Due to real estate limitations, it will be a touch and go highlight on 3 selected banks’ earnings.

$JPMorgan Chase(JPM)$

• Outperformed market expectations in 2025.

• Earnings per share (adjusted) : was $5.24 vs Q2 2024’s $6.12; that’s a -14.38% decline.

• Revenue : was $45.68 billion vs $44.06 billion expected vs Q2 2024’s $50.99 billion, that’s a -10.41% decline.

• Net income: was $14.99 billion vs Q2 2024’s $18.15 billion, that’s a -17.41% YoY decline.

• Comparatively speaking Q2 2025, top and bottom lines were actually lower than a year ago.

• Net interest income (NII) rose by +2% YoY to $23 billion.

• Wrapping up, JPM management boosted its FY 2025 guidance for net interest income to approx. $95.5 billion, about $1 billion more than earlier forecast.

• Maybe that’s the reason why JPM share price fell on Tue, 15 Jul 2025 after its earnings were released before start of trading. (see above)

• Those in the know who have looked at the numbers knew it was not that fantastic, contrary to what media has reported.

$Bank of America(BAC)$

• Slightly lagged the market in YTD performance but still reported strong results.

• Q2 showed a 3% profit increase ($7.12 billion, 89 cents per share), above analyst estimates.

• Earnings per share: was $0.89 vs $0.86 expected by LSEG vs Q2 2024’s $0.83, a +7.23% YoY gain.

• Revenue: was $26.5 billion vs LSEG expected $26.75 billion vs Q2 2024’s $25.4 billion, its a +4.28% YoY gain, missing analysts’ estimates by a whisker.

• Net income: was $7.1 billion vs Q2 2024’s $6.9 billion, that’s a +2.9% YoY gain.

• It is the only major US bank to miss Wall Streets’ expectation, this quarter.

• Net Interest Income (NII) : was $14.7 billion vs Q2 2024’s $13.7 billion, a +7.3% YoY gain.

• Interestingly, its investment banking revenue was down compared to a year ago.

• Reported resilient consumer credit and healthy spending.

• Management’s guidance for Q3 2025 revenue is approx. $27.0 billion (±2%). Forecast continues to reflect growth in NII, that is expected to remain strong due to ongoing deposit and loan growth, even as interest rate headwinds persist.

• BAC’s share price exhibited the same behaviour like JPM.

• BAC’s fell after releasing earnings before market opened on Wed, 16 Jul 2025, as the mixed results missed Wall Street expectations.

$Citigroup(C)$

• Outperformed the market in 2025.

• Earnings: was $1.96 per share vs LSEG $1.60 estimate vs Q2 2024’s $1.52; that’s a +28.94% YoY gain.

• Revenue: was $21.67 billion vs LSEG estimates of $20.98 billion vs Q2 2024’s $20.03 billion, that’s a +8.19% YoY gain.

• Net income : was $4.0 billion vs Q2 2024’s $3.2 billion, that’s a +25.0% YoY gain.

• Apart from BAC, Citibank also met both Wall Street’s estimates for topline and bottom line.

• Net interest income (NII) rose by 12% from Q2 2024’s $2.63 billion to $2.95 billion, that’s a +16.17% YoY gain.

• Delivered impressive results in both trading and investment banking, with trading revenue up by +16% YoY and investment banking revenue up by +15% YoY respectively.

• Management has also revised its FY 2025 revenue to be approx. $84 billion due to positive business trends and economic outlook.

• On Tue, 15 Jul 2025, Citigroup reported its earnings before trading start.

• Unlike JPM and BAC that saw stock price falling after earnings were reported, Citibank bucked the trend and has been rising (with expected pullback) since Tuesday.

• It is upped +8.01% for the week.

Summary.

Common Points:

• Strong trading revenues for all 3 banks, helped by market volatility.

• Late Q2 saw a rebound in investment banking activity.

• Management commentary across banks generally positive about business trends.

• Finance sector showed resilience, with most banks exiting Q2 in a better position for the rest of the year.

• Guidance came with Management commentaries reflected cautious optimism, though some warned of potential challenges from consumer credit risks and ongoing economic uncertainty.

In summary, banks’Q2 performances underscore their abilities to navigate a complex economic environment, supported by strong trading but with some caution in lending and future guidance.

How To Invest.

JPM’s view emphasizes a patient approach to investing, akin to the tortoise:

• In the face of a turbulent economic landscape, consistency & patience are crucial for long-term success.

• The reduction of tariff rates in China has provided some immediate relief.

• However, tariffs’ full impact is expected to manifest in the coming months.

• It may potentially lead to (a) increased consumer inflation and (b) reduced purchasing power.

To successfully navigate the complexities of US inflation and tariffs, focus on long-term goals rather than short-term market fluctuations via disciplined approach and concentrate on controllable factors.

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• Do you think US consumer inflation (CPI, PCE) will cont’d to rise higher from now onwards ?

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