Markets March Higher as Tariff Deadline Looms Large
Monday, July 7, 2025
Executive Summary
American equities extended their post-holiday rally with the S&P 500 gaining 0.83% to 6,279, though the euphoria feels somewhat manufactured given Wednesday's looming tariff deadline. Markets displayed their familiar schizophrenia—celebrating policy victories whilst studiously ignoring the sword of Damocles hanging over trade relations.
The Tariff Tightrope
Wednesday's July 9th deadline approaches with markets displaying remarkable complacency about potential trade policy reversals. The administration faces a choice that could either consolidate recent legislative victories or unleash the very protectionist instincts that originally spooked investors.
As Peter Tchir astutely observes, the greatest risk is that policymakers decide they were "correct all along on tariffs."
The irony proves delicious: markets are celebrating tariff policies that haven't actually been implemented. The rally began precisely when Washington stepped back from reciprocal tariff threats, not when it embraced them. Current "pause" rates have generated minimal Treasury revenue relative to the economy's size, making victory laps premature.
Winners and Losers
Wednesday's July 9th deadline approaches with markets displaying remarkable complacency about potential trade policy reversals. The administration faces a choice that could either consolidate recent legislative victories or unleash the very protectionist instincts that originally spooked investors.
The FBI's stark warning about 300% surge in "ramp-and-dump" schemes targeting retail investors provides timely context for recent small-cap volatility.
Bond Markets Signal Caution
10-year Treasury: Down 1.5 bps to 4.33%
2-year Treasury: Declined 2.7 bps to 3.85%
UK 10-year Gilt: Elevated at 4.56%
The modest decline in Treasury yields suggests bond markets aren't entirely convinced by equity euphoria. UK gilts remain volatile as markets digest Labour's fiscal positioning, reflecting persistent inflation concerns and political uncertainty.
Currency & Commodity Snapshot
Dollar (DXY): Attempting rebound from yearly lows
EUR/USD: Consolidating around 1.1750
Crude Oil (WTI): -1.0% to $67/barrel
Orange Juice: +6.0%
The dollar's struggle despite robust economic data suggests markets remain sceptical about sustainable policy momentum. Oil's decline despite Middle East tensions suggests successful diplomatic efforts, though commodity signals remain mixed.
Today's Economic Calendar
• United States: NFIB Small Business Index, Consumer Credit
• Germany/Euro Area: Industrial Production, Retail Sales
• UK: Halifax House Price Index
• Japan: Coincident & Leading Indices
The NFIB data will be particularly watched for signs of small business confidence, crucial given the sector's vulnerability to trade policy changes.
Bottom Line
Markets enter the week riding legislative success and geopolitical calm, yet Wednesday's tariff decision looms large. The administration's greatest risk may be mistaking market enthusiasm for policy validation—the rally began when tariffs were paused, not implemented.
The timing proves awkward: just as markets begin pricing in sustained economic momentum, policymakers face temptation to pursue the very trade measures that originally spooked investors. Wednesday will reveal whether Washington has learned from recent experience.
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