Henrietta Treyz, Co-Founder and Director of Economic Policy at Veda Partners, said on CNBC this morning that The defining feature of this market is uncertainty, and the calendar between now and October is booby-trapped with events that could push the Federal Reserve in opposite directions. A tariff deadline. A war. A fiscal package Treyz sizes at $300 billion and up. And a jobs picture that refuses to break in either direction. You are being asked, as an investor, to place a bet before any of the cards flip.
The backdrop makes the stakes obvious. The Fed has held the upper bound of the funds rate at 3.75% since December 11, 2025, a pause that has now stretched past 200 consecutive days. Core PCE, the Fed’s preferred inflation gauge, keeps grinding higher, with the index climbing every single month for the past year and sitting in the 90.9th percentile of its 12-month range. That is the tension Treyz is describing.
A $300 billion package the Fed didn’t plan for
Treyz told CNBC that “there’s about to be a big fiscal spend package that passes at the end of September, and it could easily be in the $300 billion and up range,” and that the Fed and rates will “have to digest” it. She also flagged $67 billion in defense spending already approved as a down payment on that fiscal impulse.
Fiscal spending of that size lands on an economy not starving for stimulus. Real GDP grew 2.1% in the first quarter of 2026, with gross private investment rebounding to 7.9%. Layer another $300 billion on top of a labor market where unemployment just ticked down to 4.2% in June, and you can see why some strategists are quietly reintroducing the word “hike” into their vocabulary. Bond markets have not fully absorbed the possibility. The 10-year Treasury yield closed at 4.49% on July 2, well below where a serious reflation trade would price it.
The July hike versus three cuts standoff
Treyz described the split bluntly. “You can be in a room with folks who will say, the Fed is absolutely hiking. It will happen in July, and others who are saying, no, we’re still going to get three cuts.” Both cannot be right. Both camps have data.
The cutters point at a labor market where monthly payroll gains have gone from healthy to microscopic, with the level barely moving from 158,927 thousand in May to 158,984 thousand in June. Consumer spending contribution to GDP has collapsed from 3.5% in the third quarter of 2025 to 0.5% in the first quarter of 2026. Goldman Sachs Research still expects the Fed to cut 50 basis points to a 3-3.25% range in 2026, arguing the inflation issue has been resolved.
The hikers look at CPI running in the 90th percentile of its recent range, core PCE that will not stop climbing, and a fiscal package that lands right into it. JP Morgan’s outlook already warned that just as many Fed officials are concerned about the upside risk to inflation as they are to the upside risk to unemployment. New Fed Chair Kevin Warsh, historically a hawk, inherits that split.
What to watch when the calendar clears
Treyz laid out Warsh’s inbox with unusual specificity, citing “the tariff update, which will be midnight July 23rd,” the war, the fiscal package, “and then offsetting it with this jobs data that continues to come in very patchy.” None of those resolve before late summer. The tariff decision comes in three weeks. The fiscal bill lands in September. The jobs report between them will be noise.
So what do you do. The VIX at 15.81 as of July 3 tells you options markets are charging almost nothing for protection, sitting in the 22.6th percentile of the last year. That is a gift to anyone who thinks the second half of the summer will actually deliver a resolution. Uncertainty this cheap does not usually stay cheap through a fiscal fight, a tariff cliff, and a Fed meeting all stacked into one quarter. You can look at the FRED series on the Fed Funds target and see 209 days of a flat line. That line is going to move. The direction is the whole argument.
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