WEEKLY MARKET SUMMARY
Global Equities: US stocks took a breather from their recent run, with the S&P 500 falling on Friday after reaching another all-time high on Thursday to end the week down -0.3%. The Dow Jones Industrial Average fared worse, losing -1.0% during the week while the Nasdaq Composite slipped on Friday to end just barely negative at -0.1%. Small cap stocks appeared to be taking a leadership role, outperforming early in the week before giving the gains all back on Friday and ending the weekly session down -0.6%. Developed International stocks also ended the week lower, down -0.6% while Emerging Market stocks ended -1.0% lower.
Fixed Income: It was the first test for the US Treasury market following the passage of the GOP budget bill, and there was some concern that demand could be tepid with the US debt poised to rise by at least $3 trillion over the next decade. The auction was orderly, however, with slightly above average demand for $39 billion of 10-Year bonds. Demand was below average for $58 billion of 3-Year notes and $22 billion of 30-Year debt, which drew a high yield of 4.889%. The 10-Year Treasury yield ended the week higher at 4.43% on concern over new tariff announcements and public criticism of the Fed from the Trump administration. High yield bonds fell along with equities, dropping -0.4% during the week.
Commodities: Crude prices ticked higher, with US West Texas Intermediate ending the week at $68.56 a barrel. Gold was up slightly to end the week at $3,371 an ounce. Copper prices were the big story, surging 11.8% during the week in response to 50% tariffs on imported copper. The premium for copper prices in the US vs. the London Metal Exchange, the global benchmark, reached 138% on the initial announcement.
WEEKLY ECONOMIC SUMMARY
New Tariffs Announced: With no major trade deals of note reached during the 90 day pause, the Trump administration issued tariff letters to several trading partners, with rates near those announced back in April. Of note, a 35% tariff on Canada, 30% on the EU, and 30% on Mexico, along with a 50% surcharge on all copper imports effective August 1st. Trump also announced a 50% tariff on Brazil in retaliation for the trial of former president Jair Bolsonaro, a Trump ally who attempted a failed coup after losing the 2022 presidential election. President Trump also warned of pharmaceutical tariffs of up to 200% to be announced “very soon”.
Fed Chair on Hot Seat: The Supreme Court has carved out protection for Federal Reserve members from being fired by the President, but it appears President Trump is trying another path to put pressure on the Fed. A week after FHFA head Bill Pulte called for Powell to be removed ‘for cause’, that argument was again raised by Office of Management and Budget Director Russell Vought. In a publicly issued letter, Vought accused Powell of “gross mismanagement” related to a $2.5 billion renovation of the Fed headquarters which has gone over budget. While the accusations may not lead to Powell’s removal, the message is a clear attempt to put public pressure on the Fed. Powell’s term ends in May 2026 and Trump will then be able to appoint a Fed Chair of his choosing. There is significant risk to US bond markets, however, if the Fed loses its reputation as an independent institution.
Banks Downgraded Ahead of Earnings: Major US banks begin reporting earnings the week of July 14th riding a wave of positive momentum. Yet, HSBC analysts cautioned those good times could come to an end, issuing a cautious outlook and downgrading several major US banks. JPMorgan (JPM), Goldman Sachs (GS), and Bank of America (BAC) were all hit with downgrades due to valuations that have exceeded historical levels despite a backdrop of elevated macroeconomic uncertainty.
CHART OF THE WEEK
The Chart of the Week shows the new tariff rates announced during the week. Most of the rates are roughly in line with the initial “Liberation Day” levels, with some exceptions. Brazil’s 50% tariff is notable since it was politically motivated and not based on the US-Brazil trade balance. The US has a net trade surplus with Brazil, exporting over $49 billion in goods while importing just $42 billion in 2024. Still, the US is Brazil’s 2nd largest trade partner behind China so the impact on the Brazilian economy will be significant.
