SANTOSTILO GLOBAL MARKETS RESILIENT AMID NEW U.S. TRADE THREATS

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Market Snapshot

U.S. Equities
Wall Street hovered near record highs on Monday. The S&P 500 rose about 0.14%, the Nasdaq gained around 0.27%, and the Dow increased by roughly 0.20% amid uncertainty over tariffs. Historical patterns, known as the “Taco Trade” effect, suggest markets often shrug off these threats, expecting at most short-term disruption

Global Equities

MSCI’s global index climbed 0.1%, while Europe’s STOXX 600 edged lower, pressured by the threat of 30% tariffs on EU imports . Nonetheless, Canada bucked the trend, rising 0.6%, and the FTSE 100 surged to record levels—up over 0.6%—propelled by strong mining and resource stocks

Fixed Income & Currencies
Long-term Treasury yields ticked higher as bond markets responded to risk and potential inflation . The U.S. dollar strengthened, reaching a three-week peak, while the euro weakened .

Commodities & Crypto
Oil prices fell on trade jitters. Precious metals initially surged but gave back gains—silver spiked before pausing, and gold retreated slightly. Bitcoin hit new highs, briefly topping $123k, as risk‑asset momentum extended

Why Markets Are Steady

  1. Tariffs = negotiation tool
    Investors anticipate tariffs being a diplomatic gambit. Markets have grown largely indifferent to repeated threats due to Trump’s history of walk‑backs

  2. Strong fundamentals
    Corporate earnings are holding firm—Q2 profits are expected to rise ~5.8% year-over-year. Earnings revisions have rebounded from -25% in April to +3% now

  3. Strategic positioning
    Funds are rotating into sectors like tech, healthcare, and financials—seen as more insulated from tariffs

  4. Waiting for data
    Markets paused ahead of key inflation and retail sales reports, maintaining an elevated yet cautious stance

  5. Tail‑risk hedges
    Safe-haven buying in bonds and gold, along with crypto inflows, suggest diversified hedging amid policy uncertainty

Risks Ahead

  • Tariff follow-through: If the 30–35% tariffs (EU, Mexico, Canada, Japan, South Korea) take effect on August 1, volatility could spike.

  • Corporate earnings: Q2 results from JPMorgan, J&J, PepsiCo, and others may reveal trade pressure effects

  • Bond market stress: Yields edging up may impact growth forecasts and risk‑asset valuations .

  • Global slowdown: China’s slowing growth and rising trade uncertainty could weigh on global demand .

  • Policy fatigue: Investors may be growing complacent, raising concerns about sudden hits if tariffs are implemented .

Strategic Outlook

Analysts from UBS recommend a gradual entry into equities, emphasizing diversification across tech, healthcare, financials—and selectively across Taiwan, India, and China. Hedging via gold is also advised to offset inflation risk  Invesco highlights the ongoing resilience of U.S. markets and recommends looking to non‑U.S. assets as valuations remain favorable

Summary

Despite escalating tariff threats, global markets have held steady, buoyed by strong earnings, investor confidence in negotiation over implementation, sector rotation, and defensive hedging. However, key catalysts loom—August 1 tariff deadlines, economic data, and Q2 earnings—that could reshape sentiment. For now, this environment reflects calculated resilience more than complacency. Markets seem poised to hold their ground until decisive signals emerge on trade policy or inflation trends.

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