HA Morning Commentary for July 8, 2025
We are treading water after Trump announced Tariffs again yesterday and spooked the market. The Tariff rates are basically the same as Liberation Day rates, but this market is 21% higher than it was when it was pricing in Liberation Day. Clearly the market expects Trump to TACO. Market will be very offsides if even half of those Tariffs happen.
We have a large bond auction today on the short end of the curve - we could see bonds move as a result and it could spook the market if it's poorly received (remember, the last time Trump decided to poke Japan they dumped the bond market on its head for a couple nights as a shot across the bow and it really affected the US dollar).
I don't have much edge today, so I'm taking a break on trading today. I'd like to see how these love letters play out between Trump and the rest of the world. I do see people saying that because he left Europe and India off the list yesterday that means a deal is coming on them soon. I'd have to respectfully disagree with that, but I'm certainly not going to be surprised if they are able to find a way to convince Trump to kick the can down the road longer. It only benefits everyone else the longer the thing stays the way it is - capital is leaving the US, rates continue to go up and the rest of the world continues to meaningfully outperform the US.
Options expiration is next week - that usually is when we can change trend. WOLF is up another 45% this morning as it continues its best HTZ from 2021 impression.
We are seeing markets price in rate cuts now at the same time cyclicals are being bid to the moon relative to defensive stocks. No one wants my beloved Healthcare stocks. We can't have both of these things at the same time - one of them is wrong.
Either rates have to come up significantly to match the market expectations of a hot domestic economy with high inflation or the stock market has to take a haircut again and price in lower GDP and earnings from the Tariff demand destruction and deflation. This magical thought that we can just go back to low inflation and rates around 0% with large and increasing deficit spending is a fairy tale.
All the best;
Peter Cook
NQ Chatroom Moderator
Hamzei Analytics, LLC
