The U.S. equity markets had a strong week on the heels of better than expected earnings growth this quarter and some weaker than expected demand for Treasuries. Adding support is the expectation for rate cuts starting next month with the market starting to increasingly price in the possibility that we’ll get one at each of the meetings remaining this year.
Without any major narrative changes, investors felt comfortable in risk-seeking although there are a few risks lurking in the background. The White House’s proposed 100% tariff on chip imports would certainly reset the global semiconductor industry, but it seems unlikely that there will be any long-term follow through on this. The same thing goes for tariffs that went into effect this week. Negotiations will likely be ongoing and Trump’s history of delaying tariffs could very well happen again here. These kinds of tariff developments would have moved the markets back in April, but they’re not even putting a dent in sentiment today. After hitting the low 20s last week, the VIX is back in the mid-teens, which suggests that investors don’t seem that concerned.
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