Global equities edged higher on Monday and Tuesday as investors balanced fresh trade tensions against mounting corporate earnings reports and awaited key inflation data.
Market performance snapshot
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The MSCI global equity index rose ~0.1%, while U.S. benchmarks posted slight gains: the Dow +0.20%, S&P 500 +0.14%, and Nasdaq +0.27% =U.S. futures also ticked upward early Tuesday as traders braced for inflation readings and earnings from big Wall Street banks .
Tariff headlines: anxiety and resilience
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President Trump’s weekend warning of 30% tariffs on EU and Mexican imports starting August 1 prompted some jitters, but markets largely shrugged it off—leaving equities near record levels=Analysts stress that many tariff announcements have already been partly priced in. Tariff-exposed sectors aside, broader equity indices have stayed firm, bolstered by positive sentiment .
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Historic patterns, such as those in 1875–1913 or the Smoot-Hawley era, show that markets can hold their ground even amid protectionist policies—though with visible strain on growth-oriented, smaller firms
Inflation data due later this week
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U.S. June CPI is expected to climb ~0.3% month-over-month, raising concerns over tariff pass-through to consumer prices
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Bloomberg reports that core CPI likely saw its sharpest monthly rise in five months—also around +0.3%—suggesting increased price pressure .
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Markets are monitoring if this pushes back Fed rate cuts, with yields on the 10‑year note (~4.435%) and 30‑year bond (~4.978%) already reflecting caution
Earnings season enters center stage
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With the second-quarter earnings season kicking off—starting with major banks—investment focus is shifting to company fundamentals.
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Profit forecasts remain modest; S&P 500 earnings are projected to rise ~5.8% year-over-year, down from +10.2% earlier in the spring.
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Still, upbeat analyst revisions (+3% vs. –25% in April) and continued optimism around tech, financials, and R&D tax provisions support forward momentum.
Investor sentiment and key drivers
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Funds from Goldman Sachs and Morgan Stanley describe the backdrop as “Goldilocks”—neither too hot nor too cold—with growth, inflation, and corporate profits broadly balanced .
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Yet they flag three key risks for H₂ 2025: escalating tariff-driven inflation, potential Fed hesitancy on rate cuts, and dollar volatility
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HSBC adds that trade war fears are overplayed, citing healthy consumer spending and likely positive earnings surprises—leading them to increase U.S. equity exposure .
Bottom line
Global markets are advancing cautiously, reacting less to tariff threats and more to earnings and inflation signals. Tariffs loom as a latent risk—but for now, dynamics like corporate profitability, Fed policy path, and inflation momentum are taking precedence. If inflation exceeds expectations or Fed cuts are delayed, markets may stall. On the flip side, stronger-than-expected earnings and a dovish Fed pivot could sustain the modest rally.