Jeffrey Sherman Midyear Outlook: Tariffs, Debt and the Fed

Broadcasting from Chicago on July 15, DoubleLine Deputy CIO Jeffrey Sherman explores the current state of the U.S. economy, highlighting the surprising underperformance of GDP relative to expectations and the growing impact of tariff policy on inflation and trade. Mr. Sherman discusses the implications of the recently passed “One Big Beautiful Bill,” which authorizes $5 trillion in additional government spending, and how this could contribute to persistent federal deficits and rising debt levels. He also dives into key economic indicators, including PMI surveys; employment trends; and inflation data, emphasizing the nuanced effects of tariffs on core goods and services. In addition, Mr. Sherman examines the labor market’s resilience, wage growth and the role of immigration in filling workforce gaps. With inflation still above the Federal Reserve’s target and interest rate cuts potentially on the horizon, he outlines the complex dynamics influencing monetary policy and market sentiment heading into the second half of 2025. Mr. Sherman concludes with insights into fixed income markets, where volatility has eased and returns have been strong across credit sectors. He discusses the relative value in high-quality assets, the potential for U.S. dollar devaluation and the importance of security selection in a tightening credit environment.