Markets React To More Tariff News

Equities and fixed income drifted lower last week as tariff concerns resurfaced.

The White House announced new tariffs last week that would go into effect August 1st if trade deals with Japan, South Korea, Canada, & Brazil are not achieved. Over the weekend, similar announcements were made with regard to tariffs on Mexican and EU goods. Markets did not take kindly to this news, but consumers haven't noticed any dramatic changes due to tariffs on inflation. While tariff revenues have risen substantially, inflation has been relatively stable. In fact, tariff revenue helped June to show a $26 billion budget surplus for the U.S. government - the first surplus in more than 9 years.

Meanwhile, market seasonality would suggest that the latter half of July could be a little

rocky. Futures show that a July rate cut looks to be out of the question. There is some scuttle that Fed Chairman Powell is considering stepping down early. More tariff news and any rise in geopolitical tensions could also keep investors on their toes the remainder of the month. However, consumers are still spending above trend, the labor market has shown resilience, economic growth in Q2 is expected to come in solid. Earnings season for Q2 begins, which may be the leading story for the next couple of weeks.

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