Monday, July 28, 2025

The Morning Call---Trump doesn't need to fire powell; he needs to stop cut government spending

 

 

7/28/25

 

The Market

         

    Technical

 

The S&P continued its methodical upward climb. It remains above all three DMAs and in uptrends across all timeframes. For the moment, all systems are go …. barring another s**t bomb from the Donald, we are likely to have smooth sailing over the near term. Given valuation levels, I am not making any new equity investments though traders might want to participate.

 

 

 


 

 

TLT was up on the week, having bounced off the lower boundary of its short term trading and ending above its 50 DMA (if it remains there though the close today, it will revert to support). And that is the good news. The bad news is that it is in downtrends across all time frames, below its 100 and 200 DMAs and facing increased inflation from the BBB and tariffs. Until it provides more strength than a challenge of its 50 DMA, my assumption is that the trend remains down (rates up).

 

 

 


 

 

After a gap up open on Monday, GLD traded down for the week and finished by threatening to challenge its 50 DMA (after five previously unsuccessful attempts). So as of the close Friday it is now above all DMAs and in uptrends across all timeframes. The inflationary implications of the BBB should keep it on an upward trajectory. I continue to hold trading positions in GDX and ETH.

 

 

 


 

 

 

The dollar lost its upward momentum last week, trading back below its 50 DMA, putting below all three DMAs. While there is support below at the lower boundaries of its short term trading range and intermediate term uptrend, there is little evidence that the worst is over.

 





            Friday in the charts.

            https://www.zerohedge.com/market-recaps/memes-over-momo-retail-hammers-hedgies-gold-bitcoin-sink

 

            Friday in the technical stats.

            https://www.barchart.com/stocks/momentum

            https://www.barchart.com/stocks/sectors/rankings

 

            Charts that make you go WOW.

            https://www.zerohedge.com/markets/charts-make-you-go-wow

 

    Fundamental

 

       Headlines

             

              The Economy

                       

The stats last week were fairly balanced both here and overseas. However, the US primary indicators negative (one neutral, three minus). There was also one upbeat inflation related indicator from abroad.

 

So, the numbers were slightly less supportive of  (1) my ‘muddle through’ scenario as well as (2) my ‘inflation is as good as it is going to get’ forecast---and that is the third week in a row of upbeat price action.

 

On the policy front:

 

(1) Trump seemed to continue to back away from his drive to fire Powell---which is a plus more for the Market than the economy.

 

(2) tariff policy is gaining some clarity with deals with Japan and Indonesia and promises that there will more with EU and India---though to be clear, we still don’t have all the details from on the Japan/Indonesia pacts. That said, they are a plus in that [a] they add clarity to the tariff confusion---which the Market loves and [b] if my thesis that this is the means by which Trump is achieving a tax increase, then it is also a long term benefit for the economy---the good news is, of course, that it narrows the annual deficit; the bad news is that fiscal discipline at this stage will be a short term drag on the economy.

 

Note: I talked to an analyst who projected that if all the trade agreements included the provision for a 15% tariff for all goods that entered the US in 2024, that would produce an annual tax take equal to the total collected on all profits from US corporations (roughly $500 billion). To be sure, some of this total will be absorbed by the exporters and some by the importers, but it still likely to be a significant number.

https://www.optimisticallie.com/p/tariff-fied

 

Bottom line. Short term, I remain in the ‘muddle through’ camp. Longer term, current fiscal policy continues to be a major negative, leaving the overall bottom line (i.e., larger deficits, more national debt) unchanged. Which means slower growth and higher inflation.

 

As always, I have to include the caveat that this is all dependent on Trump not turning everything on its head. So my conviction level is low on economic growth but much higher on the long term outlook on inflation.

 

That said, stocks love to climb the proverbial ‘wall of worry.’  Plus July is historically a good month for stock prices.

 

However, with the Market currently richly valued, I remain on the sidelines (except for my trading positions in GDX and ETH) anticipating reducing or hedging my equity position when this latest run is over.

 

US

 

                        International

 

                        Other

    

                                  The latest Q2 nowcast.

                          https://www.capitalspectator.com/next-weeks-q2-gdp-data-expected-to-report-moderate-growth/

 

                                  Has consumer spending lagged in 2025?

                          https://bonddad.blogspot.com/2025/07/has-consumer-spending-really-been.html

 

                Overnight News

 

US President Trump announced a deal with the EU involving a 15% tariff and stated the EU will buy USD 750bln in US energy and is opening up all countries, while he added the EU will purchase US military equipment and will make USD 600bln in US investments. Trump added that the deal is the biggest ever made and will be great for cars, as well as noted that agriculture is also to have a big impact. Furthermore, Trump said they are looking at deals with three to four other countries and countries will probably receive a letter of clarification or confirmation this week.

https://www.zerohedge.com/markets/trump-eu-reach-tariff-deal-avoid-trade-war

 

US President Trump is said to freeze export controls in order to secure a trade deal with China, according to FT. It was separately reported that US and China are expected to extend the trade truce by 90 days, according to SCMP.

 

South Korea’s Finance Minister and Foreign Minister will meet with US counterparts this week, while South Korea is preparing a trade package and is drawing a mutually agreeable plan including a shipbuilding partnership. It was separately reported that South Korea suggested tens of billions of dollars’ worth of shipbuilding projects to the US in trade talks, according to Yonhap.

 

Months of intense negotiations appear unlikely to produce a trade deal between the US and India before the August 1 deadline, despite Trump having teased one for months as “coming soon”, according to three people familiar with the situation.

 

                Monetary Policy

 

              Trump’s view on monetary policy versus reality.

              https://econbrowser.com/archives/2025/07/what-fed-funds-rate-does-trump-want

 

The harder that Trump tries to get lower interest rates, the less likely he is to get them.

https://www.wsj.com/economy/central-banking/trump-fed-pressure-rate-cuts-8e91185f?mod=economy_feat2_central-banking_pos1

 

                Fiscal Policy

 

              The good and bad provisions of the BBB.

              https://www.cato.org/commentary/three-best-worst-things-trumps-big-tax-law

 

Trump doesn’t need to fire Powell; he needs to stop the government’s spending addiction.

https://reason.com/2025/07/24/trump-doesnt-need-to-fire-jerome-powell-he-needs-to-end-americas-spending-addiction/

 

 

                Tariffs

 

              How to calculate a tariff (it ain’t easy).

              https://www.ft.com/content/3b6b0e7a-5092-42aa-a619-97f1c3c88792

 

      Investing

 

            Get used to a weaker dollar.

            https://www.advisorperspectives.com/commentaries/2025/07/25/weaker-dollar-time-used-to

 

            Latest from BofA.    

                  https://www.zerohedge.com/markets/hartnett-why-next-fed-chair-will-launch-yield-curve-control

 

                Goldman basically agrees.

            https://www.zerohedge.com/markets/market-technicals-remain-favorable-goldmans-hedge-fund-honcho-warns-light-oncoming-train

 

            The path of least resistance.

            MARKET CALL: Path Of Least Resistance

 

 

            More bubble talk.

            https://www.ft.com/content/2450c892-3b9e-431e-a352-1d01df269617

 

    News on Stocks in Our Portfolios

 

What I am reading today

 

            The most expensive mistake in ancient Roman history.

            The ancient Romans' most expensive mistake in their hunt for silver | National Geographic

 

 

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