This week on 7 Market Movers, Wealth Enhancement’s Deputy Chief Investment Officer Doug Huber discusses multiple developments in the news, including trade wars, tech earnings, and the new federal budget bill working its way through Congress. He talks about how “markets can handle bad news; the uncertainty is what they struggle with.” Find out what this means for markets in the video below.
If you have further questions about how the current economy and market environment could affect your financial plan, reach out to a Wealth Enhancement advisor today.
TRANSCRIPT:
Hello, and welcome to this week's Seven Market Movers update. I'm Doug Huber, the Deputy Chief Investment Officer here at Wealth Enhancement. And today, we're diving into the latest developments that have been shaking up the markets. From the passage of President Trump's new tax bill late last week to a head fake on 50% European tariffs and, federal appeals courts blocking the administration's reciprocal tariffs, there's a lot to cover. So let's get started. This week, the S&P 500 opened higher and has since seesawed sideways largely driven by continued trade uncertainties.
Outside of the trade wars, investors have been particularly focused on the tech sector with the anticipation of the video earnings reports causing quite a store stir leading into the middle of the week. Despite theirs and others' positive earnings reports, the overall market sentiment still has remained cautious.
One of the biggest stories to start the week, was the carryover of the passage of President Trump’s One Big Beautiful Bill Act that was passed by the house of representatives late last week. This sweeping legislative package includes significant tax cuts for individuals and businesses as well as spending cuts and border security funding. In its current form, the bill aims to make permanent the individual income and the state tax cuts from Trump's first term and introduces new tax breaks for tips, overtime, and interest on auto loans. It also raises the state and local tax deduction cap and temporarily boosts the standard deduction and child tax credit.
While the bill has passed the house, it still faces a tough battle in the senate and will likely have material edits along its path, to potential approval. The market's reaction to this has been mixed. It appears in opposition to this idea of reducing our fiscal deficit. And so bond markets have responded accordingly, pushing yields higher across the US treasury curve.
However, some market pundits felt that there were positives that could lead to trickle down economic impacts from increased dollars in the pockets of middle and upper end consumers.
Just as markets were starting to digest that news over the weekend to begin the shortened trading week, we had news out of the White House that that the Trump administration was considering blanket 50% tariffs on the EU under this contention that they were being overly difficult in their negotiations, dragging their feet, etcetera. And so right at the start of the shortened trading week, the market was really undoubtedly riled, as this new confusion kind of entered this headline merry-go-round that we've been, only for a pause to be introduced later that day until July.
And so the markets started the week with a lot of uncertainty around not only this new passage of a tax bill, but also around what's going on with the EU, in our trade negotiations alongside them. Finally, just as we thought we couldn't get another major development in the news, a federal court blocked president Trump's reciprocal tariffs universally that were imposed on goods on nearly every foreign nation. The court ruled that the Trump administration exceeded its authority under the International Emergency Economic Powers Act, and this created a significant setback for his trade agenda.
It's seemingly that all these typical tariffs had gone away. And so this is just another layer of uncertainty for markets to deal with. And I think I've said this on multiple calls in the past. The markets can handle bad news; the uncertainty is what they struggle with.
I think as a whole, what we are seeing right now, as of recording this on the end of Thursday, an appeals court actually reinstated the reciprocal tariffs, which is interesting. The market hasn't necessarily responded negatively to that. I think at this point, the market is very much, kind of tired of this headline merry-go-round and is really grasping for anything that is factual. I think the positives of this week is we did see strong earnings reports specifically in the tech sector.
Obviously, the negatives of this is that while we did dodge this potential for a fifty percent blanket EU tariff, that is going to come back around in a couple months, and so we're hopeful that there will be negotiations, material negotiations, or progress towards them with both China and the EU.
From an economic perspective, we haven't seen terribly damaging data to date. Although there is a lot of anticipation that there is still potential for a supply shock, we haven't seen port activity from China pick up. And so there's a lot of eyes watching. And I think we're kind of stuck in this lull pattern, this bit of a sideways pattern here, you know, that we'll they'll have slight updates, based on kind of good news out of earnings.
But with a market that is still very much cautious around what impact is going to come from this, the administration's trade policy, what actually is legally enforceable, what isn't. If it is not legally enforceable, will the administration comply? And if it is legally enforceable or is able to go forward, how will these negotiations pan out? And so, it has been an eventful week.
It has certainly been a week that, at least from a headline perspective, there's been a lot of ups and downs. Although from a market perspective, we've probably seen less reaction than we have in periods past, and I think that's partially due to a shortened trading week. Likely some participants on vacation that that it is typical. We see lower volumes around these periods.
But I also think it's because people are just getting a little tired. And there was just a lot of back to back reversals this week, and I think at some point, folks are saying, listen. We're going to grasp on to anything that is factual in this headline stuff. We're just going to let it blow over until the next one comes.
And so I think, you know, we are certainly paying attention to all of this. We are trying to do the same in terms of taking away what is true information, what economic impacts are actually coming to bear, and how our portfolios are affected by that. But our belief is still that for the foreseeable future, volatility is here to stay. That can be our friend in a lot of ways.
We can utilize volatility to move portfolios to tax loss harvest, to get in and out of positions and take advantage of opportunities that'll present themselves. And in the meantime, you know, we are just trying to continually get smarter around what's going on in the economy, and kind of how that's impacting our portfolios. And so with that, hopefully, next week is a little more calm. We get maybe a little more clarity, but we certainly will be watching the markets, keeping an eye on the developments and how they unfold.
And we want to thank you for tuning in, and please don't forget to reach out to your advisor or our Roundtable of experts with any questions. We'll see you next week. Thanks for tuning in.
This information is not intended as a recommendation. The opinions are subject to change at any time and no forecasts can be guaranteed. Investment decisions should always be made based on an investor's specific circumstances. Investing involves risk, including possible loss of principal.
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