Reinhart Week in Review by Madison Investments 06.20.2025


FED

The Federal Open Market Committee (FOMC) kept the Fed Funds rate at a range of 4.25%-4.50% following their meeting this week. The Summary of Economic Projections (SEP or “dots”) showed broad agreement around two cuts in 2025 and two to three in the following years. The FOMC statement and Chair Powell’s remarks in the press conference point to the FOMC still seeking to normalize policy but waiting for further clarity around the inflationary impact of tariffs. 

Our Take: The Fed is seeing positive signs around inflation remaining contained and growth not softening too much. With growth and employment holding at good levels, the FOMC believes that there is low risk in waiting to cut to what it views as a neutral policy rate until after tariffs have taken effect and had their impact on inflation.

 

RETAIL SALES

Retail sales fell 0.9% in May, underperforming expectations of a 0.6% decrease. The retail sales control group, which feeds GDP calculations, rose 0.4% versus expectations of a 0.3% increase.

Our Take: There have been dramatic swings in monthly retail sales reports this year, driven by bad weather, wildfires, and tariff front-running. The primary culprits for the decline in May sales were autos and gasoline. On average, retail sales thus far in 2025 point to a slowing economy but not a recession.

 

MIDDLE EAST

For the first week of the Israel-Iran conflict, hostilities have remained between those two nations with others only helping Israel defend against Iranian missile and drone strikes. Thus far the U.S. has not joined in the attacks on the Iranian nuclear program and Iran has not attacked energy infrastructure in the Gulf or restricted shipping traffic through the Strait of Hormuz. Crude prices remain elevated compared to before the Israeli attacks but have not surged to levels suggesting concern about supplies from the Gulf.

Our Take: The worst-case scenario for the conflict has not yet come to pass. As long as the conflict does not spread throughout the region or result in a constriction of crude supplies, the economic impact is likely to be contained.

 

MUNICIPALS

Many public transit systems across the country are experiencing decreasing ridership, which is leading to cuts in service and changes to credit ratings and outlooks. The San Francisco Bay Area Rapid Transit District was downgraded by Moody’s Ratings earlier in June, from Aaa to Aa1 due to a decline in usage and projections of a $400 million budget deficit in upcoming years. This week, the Milwaukee County Transit System announced a $10.9 million budget deficit, leading to likely cuts in service and frequency of routes. In addition, Moody’s revised its outlook on the Chicago Transit Authority to negative earlier this year, indicating that the operating deficit likely will not be completely offset by fare increases and spending cuts. 

Our Take: Many transit agencies have not fully recovered from the effects of the pandemic. Service reductions, fare increases, and route cuts will likely continue as agencies struggle to balance their budgets amid a decline in ridership, uncertain federal funding levels, and rising costs.

“Madison” and/or “Madison Investments” is the unifying tradename of Madison Investment Holdings, Inc., Madison Asset Management, LLC (“MAM”), and Madison Investment Advisors, LLC (“MIA”). MAM and MIA are registered as investment advisers with the U.S. Securities and Exchange Commission. Madison Funds are distributed by MFD Distributor, LLC. MFD Distributor, LLC is registered with the U.S. Securities and Exchange Commission as a broker-dealer and is a member firm of the Financial Industry Regulatory Authority. The home office for each firm listed above is 550 Science Drive, Madison, WI 53711. Madison’s toll-free number is 800-767-0300.

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Madison Investment Holdings, Inc. acquired the fixed income management assets of Reinhart Partners, Inc. on June 11, 2021 and now employs the Investment Team that previously managed the assets at Reinhart. The Investment Team manages the assets using substantially the same strategies and objectives as at Reinhart. Performance information dated prior to the purchase reflects that of Reinhart Partners, Inc.

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