This nine-to-five ain’t workin’, why the heck do I work so hard?

Equity markets appeared less than concerned by Trump’s latest threats to introduce new levy tariffs, which included 50% on copper and 200% on pharmaceuticals. The price of copper rose by 17% on the news. Even the threat that there would be no extensions beyond August 1st caused barely a ripple in the S&P 500. According to John Authers, commenting this morning on Bloomberg, if the tariffs indeed go ahead exactly as announced, then the average rate on all US imports will be the highest in a century, back to levels last seen during the Depression-era Smoot-Hawley Act. Equity investors seem to be quite confident this will not be the outcome, and ultimately imply significant climbdowns, presumably in return for concessions from other countries. The Vix fear index fell yesterday, a possible further indication of confidence that the tariff outcomes will be far less draconian than yesterday’s announcements would suggest.

One is reminded that either this reaction or lack of reaction comes at a time when stocks are at all-time highs, valuations are extreme, and sentiment is very bullish. Only time will tell if this confidence that Taco Man will ultimately back down is justified, and if the proposed tariffs will continue to have a limited impact on the US economy, as appears to be the case at present. Capital Economics’ deputy chief markets economist probably sums up the current mood best, as he writes, “While continued noise around tariffs could well generate some volatility in the near term, we think the bar for another major sell-off remains quite high.” Confidence or complacency, we shall see.

The summer months are often volatile for markets due to reduced liquidity as traders and speculators’ inventories dwindle during the holiday season. Even the recent rise in treasury yields since the start of the month has had limited effect on equity sentiment. The 10-year US Treasury yield is climbing back to 4.5%, while the 30-year approaches the 5% threshold again. Yields increased yesterday despite US consumer inflation expectations for the coming year dropping to 3% in June 2025, from 3.2% in May, marking the lowest in five months, according to the latest New York Fed survey. Equity markets in Europe seem little moved in futures trading this morning. Later today, we get the minutes of the last Fed meeting.

For those considering seeing F1, the movie, even if F1 isn’t your thing, I would recommend it as 2 hours of great entertainment. I was none the wiser, really, about F1 racing in the modern world, at the end of the movie, but was gripped for the whole length of the film. It is two hours of adrenaline-filled entertainment.