Weekend Update #237
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Equity markets hovered around all-time highs his week but faced some resistance as President Trump announced new tariff rates for a handful of countries. New tariff rates were assigned to Canada, Japan, and South Korea, which are all in the top 10 import sources for the U.S. in 2025. President Trump signaled he was still open to trade negotiations but that the August 1st implementation will be a firm deadline following an extended pause on Liberation Day announcements. The Brazilian real tumbled against the U.S. dollar as President Trump announced 50% tariffs on the country, citing their treatment of former President Jair Bolsonaro. Bloomberg also reported that Vietnam officials were “surprised” to see President Trump’s statement that the country had agreed to 20% tariffs as the nation was reportedly targeting a 10-15% rate in negotiations. On Friday, a positive announcement came that the U.S. and India are working on a trade deal to reduce tariffs below 20%. Investors are dealing with higher tariff uncertainty this week but don’t want to overreact to announcements after the TACO trade took hold, so the market will continue to digest negotiation progress through the August 1st deadline.
In economic data for the week, NFIB’s Small Business Optimism Index fell slightly in May, in line with consensus expectations, as small businesses struggle to secure adequate labor quality but reported the biggest monthly sales growth improvement since April 2021. Initial Jobless Claims for the week ended July 5th were 227,000, lower than the expected 235,000, but in a report that also showed Continuing Claims rising to 1.965 million, the highest level since November 2021. Wednesday’s release of the FOMC Minutes from the June meeting showed relatively split opinions on whether to hold or cut interest rates in the near term. Almost all FOMC members expect continued weakening in both labor markets and economic activity but are uncertain about the timing and level of inflation expected from tariff policy.
NVIDIA Corporation became the first company in history to reach a $4 trillion market cap this week as demand for AI infrastructure remains supportive of Nvidia’s explosive sales growth. Bitcoin prices this week also reflected a risk-on mood, rising above $118,000 per coin to new all-time highs. Tesla shares fell more than 6% on Monday as Elon Musk announced that he would create a new political party in the U.S., the “America Party”. The new political pursuit created more investor concern that the CEO’s attention will continue to be diverted away from his companies, during a particularly rough period of vehicle sales at Tesla. Next week, investor attention will shift to U.S. banks as they kick off the Q2 2025 earnings season, and a host of economic data will be released including CPI, PPI, Retail Sales, and Consumer Sentiment.
Friday’s Close (Weekly Performance)
S&P 500 6,259.75 (-0.31%)
Nasdaq 20,585.53 (-0.08%)
Dow Jones 44,371.51 (-1.02%)
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