Fiscal Flows, Bank Credit, And The Fed For July

Summary

• June 2025 fiscal flows were weak, extracting $2B from the private sector, signaling short-term market caution and likely negative SPX performance for July.
• The passing of the federal budget and debt limit increase unlocks significant liquidity, setting the stage for a strong rally later in the year.
• Fed rate cuts and resumed government spending are bullish for risk assets, but global fiscal contraction and trade policy uncertainty warrant caution until Q4.
• Expect a flat market through September, with a potential year-end rally as fiscal and monetary conditions improve and seasonal trends turn favorable.

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Introduction

With equity markets teetering between bullish liquidity injections and global policy tightening, this article unpacks June 2025's fiscal flows to forecast risk asset performance into Q3.

Fiscal flows reflect the movement of money between the federal government, private sector, and external

Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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