Q2 2025: The Deal is Almost Done – Now What is the Rate, and When can We Start?

| July 21, 2025

The modern world can be a frustratingand impatientplace. The collapse of time through theadvances in technologyhascreated a world where people expect solutionsimmediately,even when the problem may have existed for decades. We expect solutions to work on the first try and if theydon’t,well,the problem must be unsolvable.Andif the problem is unsolvable,wecomplain about the problem’s existence, rather than trying to develop another solution to it.We all know apathetic anger is not the solution to our long-termneeds,bothwithin ourlivesandwithin the world.We alsoknow that focusing only on problemssteals the joy of opportunity.

AsFinancial Planners andInvestment Advisors, our jobis to focus on the risk, the reward, the rules of the road, and put them all together into an actionable plan: aplan that meets your needs, sets clearobjectives, and lives up to thoseobjectives. Solutions take time andstaying disciplined is rewardingin the long run.

You might rememberjust a few short months ago, markets the world over were down over 20% in some cases. People werescreaming aboutapossiblerecession. People were selling longstandingpositions,and the word of the day waspanic. Fastforwardone quarterandwe can see a market that again had aV-shapedrecovery. Why,you might ask – because with time comes clarity and over time markets seek solutions, not panic. Panic is temporary and we do not planwithpanic in our hearts. We plan with faith, skill,andclearobjectivesaswe seekopportunity.

You might also remember that we laid outthe following four key market factors that could either drive us higher or pushpauseonthe market rally and cause a recession if handled badly. Those four driverswere as follows:

Tax CutsoverTariffs

U.S. Growth and Lower Inflation

The Trump Card

Lower Interest Rates and FED Rate Cuts

Three of these four drivers are showing real promise and have all but calmed the fears of the market. Sinceour last letter, wehavethe followingresponses to theselong-termobjectives:

The Tax Cuts of 2025 are done! Nothing isperfect,and the market knows this,but the market also knows we now have clarityfortax rates. The greatest planning solution in the bill is making the 2017 tax rates permanent. Theshorter-termcuts help stimulategrowth,but the set rates help give every business and every citizen clarity.Tariffsremainrevenuepositivewith over$100 billioncollected so far and over$300 billionexpected by the end of theyear.3Tariffscanbeeffective in trade negotiations.

U.S. Growth and Lower Inflation – just a few months ago the market said inflationwasrising, jobswerecollapsing,and growth was slowing the world over.In the short run we have seen the opposite. We have seen unemployment remain stable andtickdown slightly to 4.1%4We have also seen inflation moderateto 2.4% over 12months.5And, when you look at energy costs, you see double digit reductions in inflation.Cooler inflation, stronger labor, better wages, and greater purchasing power helps the consumer – which drives the market.

The Trump Card. We acknowledge that this can be a polarizing perspective.But,the ability to remainflexible, focused, and willing tomovethe timing of a deal can have long-term positive impacts. The factremainsthat the market has recovered from itsinitialdownturn in response to theApril 2nd tariffannouncements.Originally, the TradeTariffswere totake effectin July. Those deadlines have been moved to August 1stand willmost likely bemoved again. In the interim,we have seen the market digest whata normal tariff is, what the costisto the consumer,and wheretheminimumwillsettle.The same can be said for wars: both wars and tariffs involve a negotiation process, and theinitialresponse is not always a sound indicator of thefinaloutcome.

The FED Funds Rate and the Federal Reserve Interest RatePolicy remaina sticking point for the market.The Federal Reserve continues to hold interest rates atcurrentlevels of4.25% to 4.5%.This is good for money markets andfixedincome. Forexample,the Money Market holding we use to create interest income on reservesremainsover 4%6. That is great for savings and bond yields, but notgood for debt services. Thirty Year mortgages on average remain at or over 6.8%. Housingremainsone of the most inflation sticky and expensiveitems on the market. Equityremainstrapped in homes as the refinance markets are nearall-timelows and people are waiting for rates to go below 6%, which isa 2 point move from the 8% highs in 2023.Why does this matter?Because lower rates mean lower debt costs for the U.S. Treasury, meaning less taxes and deficits for us,the U.S.taxpayer. Lower rates mean affordable mortgages, more lending activity, more sellers, more buyers,and ultimately, economicgrowth.

The DHT Investment Committee sees these four drivers as the table setting for U.S. Growth into 2026. We see three of the four drivers in place. The market nowremainsinterested in whatthe Federal Reserve willdo with rates. Drastic rate cuts would signal a recession or fear of a recession. No one wants to see major changes,but a systematic plan to reduce rates and match inflationis likely in 2026.

Our investment strategyremainsU.S. Equity focused.Ourgrowth positions have an overweight totechnologyand our fixed income / bond positionsremainfocused on the eventual reduction in rates. Our duration exposurecontinues to produce both income andlong-termpotential for appreciation. The DHT Investment Committee continues to remain disciplined and focused on the opportunities of this market cycle. Wedid not change course through April and now that the market has fully recovered,we havetaken this opportunity to fund our income reserves for income clients over the next 12 months. We have harvested gains in those accounts and continue toseekbuyingopportunities in thelong term. We see inflation continuing to moderate with energy costs. Interest rates will help reduce borrowing costs and when that happens, the committeebelieves we will see amarket move positively and relatively quickly through the end of this year and into2026.

There are pressure points in the market. Consumer creditremainsa concern, as doeslackof clarity on interest rates. The final tariff rate orminimumtariff ratesremains to be seenfor countries who do not remove trade barriers / reduce their tariffs.The committee continues tomonitortheserisk factors.

Staying disciplined and focusing onthebigpicture is not always the easiest plan. There are manydistractions,and they come so quickly thatthey can overwhelmthesenses.That is why we plan. That is why we review your plan and make sure itremainson track and ready for the risks andrewards,now and in the future. Benjamin Franklin said it best:“If you fail to plan, you are planning to fail.”

We are actively planningevery dayfor you and your family.Andweremainfocused on thelong-termgoals, opportunities, and strategies that willmake yourdreamsreality.

John C. Donohue, III CFP ® 

Gregory B. Hart  

Michael J. Thomson Sr. MBA, CLU, ChFC, RHU, REBC 

Brooks D. Shertzer Sr. 

Office: 410-803-0160 

Fax: 410-803-0167 

Click Here to visit our New Website: www.dhtfg.com 

1 S&P 500 Index – as a reference to the V Shaped Recovery 2025

2 US could collect$300 billionin tariff revenue this year, Treasury chief says | Reuters US could collect$300 billionin tariff revenue this year, Treasury chief says | Reuters

3 The Employment Situation - June 2025 BLS News ReleaseThe Employment Situation - June 2025

4 Consumer Price Index Summary - 2025 M05 Results Consumer Price Index Summary - 2025 M06 Results

5 VUSXX-Vanguard Treasury Money Market Fund | Vanguard VUSXX-Vanguard Treasury Money Market Fund | Vanguard