by Michael P. Reinking, CFA & Eric Criscuolo

Published on 07/11/25

Last week before traders clocked out for the holiday weekend the rally accelerated. The S&P 500 closed at a new all-time high following a better-than-feared jobs report and as the Big Beautiful Bill was making its way to President Trump’s desk to be signed on the holiday, just as he drew it up. However, as the weekend drew to a close the reality of a full workweek and the looming trade deadline quickly set in.

With the tax bill done and a big rally over the last three months providing some cushion, it appears that President Trump decided to turn up the volume on trade. Despite some optimistic commentary from the administration there haven’t been any additional deal announcements this week and there are even some questions about last week's Vietnam announcement. Pretty much all of the headlines related to trade this week were negative but overall markets have taken the news in stride. For the week most major US indices ended only modestly lower. 

Before diving a bit deeper into trade let’s quickly discuss the Big Beautiful Bill. During the holiday shortened week Congress put in some overtime with a record-breaking vote-a-rama in the Senate, twenty-four hours of tense negotiations in the House and a record-breaking filibuster speech by Minority Leader of the House Hakeem Jefferies before the Bill passed by a vote of 218 to 214. The signing ceremony was somewhat overshadowed by Joey Chestnut’s return to the Nathan’s Hot Dog Eating contest and announcement of a UFC event at the White House next year.

The bill makes permanent many aspects of the 2017 Tax Cuts and Jobs Act, introduces temporary no tax on tips and overtime and an increase in the SALT deduction. There are increases in spending on defense and border security. One potentially important part of the bill which could drive investment is the acceleration of expenses for investment in equipment and R&D. The Bill also extends the debt ceiling removing a potential overhang. On the other side of the ledger, the offsets included limitations on eligibility and tighter restrictions on Medicaid and a reduction of clean energy incentives. One other offset is potential revenue generated from tariffs, which is the perfect segue into trade.

President Trump has been sending letters to mostly smaller trade partners throughout the week, but recipients also included Japan, South Korea and Brazil. At a high level those letters set tariff rates between 25% - 50% to go into effect on August 1st should a deal not be reached. There had been some hope that a deal with the EU would be struck this week, but President Trump said a letter is in the works and there have not been updates on India or Taiwan yet either. Canada also got a special shout out with tariffs on non-USMCA compliant goods set at 35%. President Trump suggested that baseline tariffs for other trade partners would be 15% - 20% up from ~10% previously. This week tariffs on copper were increased to 50% while President Trump also warned that a supersized pharma tariff would be announced soon.

For all intents and purposes the letters extend the deadline for negotiations which President Trump says is now set in stone. This extension adds some more time to the waiting game for both businesses and the Federal Reserve as they wait to see the ultimate policy and impact of tariffs (purgatory got longer). The numbers that were thrown out this week were much higher than previous market assumptions but the limited response in markets suggests that investors still believe they will be negotiated lower.

The other big story this week was the massive rally in the crypto complex amidst a steady stream of crypto-Treasury company announcements and ahead of the House’s “Crypto Week” which starts on Monday. Shortly after the close yesterday Bitcoin broke above 112k to a fresh all-time high and has not looked back currently hovering ~118k. According to CoinMarketCap the market cap of all cryptos has increased by ~$60B this week to just under $3.7T. Many of the crypto assets that are associated with bridging the gap of defi and traditional finance have been leading the way.

We’ve continued to see bouts of rotational activity within equity markets this week. As you might expect, in a somewhat flat week the sector level activity was mixed. Energy was the best performing sector up nearly 3%. Info tech continued its outperformance helped by the semis. Nvidia became the first company to cross the $4T threshold. Other AI related companies in the utility sector and industrials also traded well. Industrials were also helped by the airlines after Delta reinstated its guidance, which was ahead of street estimates, with the company pointing to an improvement in demand.

On the downside, financials were down nearly 2% ahead of the start of earnings next week. There were some downgrades in the sector leading to some weakness and the payments processors have been under pressure ahead of Crypto Week. Staples were also down a similar with food stocks under pressure after some disappointing earnings. Communication services also underperformed with ad companies getting hit after WPP cut guidance and cable/network stocks were also down. 

It was a very light week for macro data. Looking at some metrics for the Fed's dual mandate, the data continues to lead down a "stay the course" path for rates despite the social media efforts of Trump and several others in the administration. Weekly Initial claims moved down to 227k from 235k last week, while continuing claims held steady at 1.965ml. Meanwhile, one-year inflation expectations from the NY Fed’s survey of Consumer Expectations ticked lower, from 3.2% to 3.0%, while 3 and 5-year expectations remained at 3.0%. While the market still expects a rate cut in September, expectations fell slightly from last week (61% versus 64% prior). Detouring to China for a moment, the deflationary concerns continued after PPI fell the most in two years (-3.6%) though CPI increased slightly after declining for four straight months.

Back to the US, the NFIB Business Optimism Index came in slightly below expectations and was down from last month. An increase in respondents reporting excess inventories was the largest contributor to the decline.  

A late item to note was the Treasury posting a $27B surplus in June, helped by tariff collections of $27 billion for the month, up from $23 billion in May and up 300% from last year.

The treasury curve bear steepened with the 10-30ys up ~10bp while the 2y was about flat. The biggest part of the move came on Friday following the renewed tariff rhetoric from President Trump. Speaking of moves, rate vol (MOVE index) fell to December lows during the week, though popped higher on Friday. The long-end of the curve continues to be impacted from multiple directions: potential inflation reignition and/or growth concerns from tariffs, worries of fiscal deficits and treasury supply and foreign demand being some of the more prominent.   

The on/off, back and forth nature of the tariffs keep pushing things out for a Fed that’s looking for hard data on their impact before moving. This was the line of thought Chicago Fed President Goolsbee laid out on Friday.

Looking ahead to next week the key US economic data includes the inflation data and retail sales.  On the global front there will be updates to trade balances and a bunch of economic data out of China amidst continued stimulus speculation. Never a dull moment in Washington so we'll be listening for more trade updates and it is Crypto Week. All that being said, at least for a couple of weeks the focus could shift back to the micro from the macro with the official start of earnings season. Major financials begin reporting on Tuesday and there are some industrials in the back half of the week. Keep in mind next week is also options expiration. Have a great weekend!