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.
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.
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.
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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