Investment Strategy

Market Thoughts: Let’s make a deal

With the August 1st tariff deadline looming, Washington seems to have sprung into tariff deal mode – Asia the current beneficiary, with deals now struck with the Philippines and Japan. South Korea is circling. Europe and China loom menacingly.

Animal spirits are energized by an apparent willingness of the U.S. to negotiate. The surprise? A reduction in Japanese auto levies from 25% to 15%. With tariffs locked down, Prime Minister Ishiba may step down, making room for a new government. A changing of the guard.

The White House managed to ratchet higher what first looked like a unilateral 10% tariff end game. Levies may approach double that. They’ll need to be paid for. I expect we’ll continue to see a gradual drag on growth and corporate margins. Inflation pushing higher, longer term interest rates in tow.

Exporters will inevitably cover some tariff costs. U.S. importers as well. That said, consumers will see prices increase. But as I’ve mentioned before, that may well end up being global rather than kept to U.S. consumers. Everyone suffers. Hopefully, no one breaks. Hope springs eternal in current markets.

The ECB held policy rates steady after seven consecutive rate cuts. While the easing cycle is drawing to a close, September is a live meeting. What happens with EU-U.S. tariffs in the interim will inform the ECB’s action.

I expect the Fed to remain on hold in July. September’s meetings will be important for both the Fed and ECB. We’ll get new economic projections from each central bank. U.S. bond markets seem twitchy for the Fed to cut rates in September. Like the ECB, tariffs will play a large part informing next steps.

Equity markets are chasing after new highs. If momentum continues to be driven by earnings and a broadening of participation outside of big tech and financials, it’s healthy. If instead it’s driven by meme-mania and squeezing shorts, we’re going to see air-pockets.

August can be silly season on Wall Street. Markets are less liquid as traders attempt to step back for summer holidays. We tend to get one of two outcomes. Investors agree to put down the sticks and stones they throw at each other and markets range trade, or they riot. A riot’s generally caused by a left-tail event and/or because of positioning in thinly traded markets.

As we work our way through earnings season, the next few weeks for the S&P 500 are particularly important. With the trade weighted dollar having declined some 7% this year, I expect we’ll hear from companies with strong international sales about the benefits of a weaker dollar.

NASDAQ listed companies have the most to gain from a weaker dollar, with around half of revenues coming from international sales. The tech sector is the largest beneficiary of sales outside the U.S. Something to keep in mind as markets press higher.

The macro landscape feels a little like boiling a frog. Washington’s dialing up the heat, hoping the frogs won’t notice. The frogs–consumers and investors–have noticed. Investors need Washington to land the big trade deals. Markets can then price in the associated risks.

Trade counteroffers apparently remain on the negotiating table. Carve outs as well. Investors need to know where levies land with principal trading partners. Today they don’t have a clue. China and Europe are front and center. Let’s make a deal…

Unless explicitly stated otherwise, all data is sourced from Bloomberg, Finance LP, as of 7/24/25.

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With the August 1st tariff deadline approaching, Washington's negotiations with Asia bring hope, but Europe and China remain challenging. Discover how these developments could impact global markets, inflation, and interest rates.