Good Morning Investors,
Stocks held steady Tuesday despite President Trump’s latest tariff salvos, as markets continue to absorb headline shocks with a surprising degree of composure. The S&P 500 ($SPY ( ▲ 0.42% )) closed nearly flat at 6,228, the Nasdaq ($QQQ ( ▲ 0.4% )) ticked up 0.03%, and the Dow ($DIA ( ▲ 0.31% )) slipped 0.4%. Rather than panic, investors seem to be interpreting these announcements as part of the ongoing negotiation theatre, a far cry from the sharp sell-offs we saw back in April.
I want to highlight my latest piece here on earnings season --> https://www.investing.com/analysis/is-sp-500-on-track-for-6500-by-yearend-with-tech-leading-the-way-200663305
Opening Bell: The Tariff Spiral Gets Even Messier
President Trump on Tuesday took the trade war to another level, announcing a 50% tariff on imported copper and threatening to impose 200% tariffs on pharmaceuticals. He reaffirmed that the Aug. 1 deadline for his latest raft of tariffs, including 25% to 40% duties on 14 nations, will not be extended. More letters are expected to go out today, adding to the drama.
Markets are increasingly "desensitized" to these moves. Traders know by now that Trump’s strategy often involves extreme opening bids, followed by drawn-out bargaining. But that doesn’t mean there aren’t real risks. Copper prices surged 10% on Tuesday, and pharma stocks are already feeling the heat.
At the same time, Trump’s statements at a Cabinet meeting, including calls for Fed Chair Jerome Powell to resign, highlighted the unpredictable policy environment. Investors should brace for continued volatility but keep in mind that many believe these threats are more leverage than final policy.
The Fed: Watching, Waiting, and Divided
All eyes turn today to the release of the Federal Reserve’s June meeting minutes. The central bank has been caught between conflicting signals: softer labor data and consumer sentiment that suggest room to cut, but tariff-fueled inflation risks that argue for patience.
Market odds for a September rate cut have slipped to 62%, with almost no chance now priced in for July. Fed officials have signaled a “wait and see” approach, and the tariff chaos only reinforces that stance. For now, I maintain that the next move is likely to come in September, but as always, we’ll need to watch the guidance closely.
Earnings Season: The Calm Before the Tech Storm
While tariffs dominate the headlines, earnings season is about to take center stage. Big banks kick off reporting next week, with JPMorgan ($JPM ( ▲ 1.24% )), Wells Fargo ($WFC ( ▲ 1.65% )), and Citigroup ($C ( ▲ 0.76% )) on deck. Despite modest Q2 growth expectations (Finance sector earnings forecast up 8.2%), strong capital returns through buybacks and dividends have kept investor sentiment upbeat.
Looking at the broader S&P 500, Q2 earnings are expected to rise 5% on 4% higher revenues. The big story, though, remains tech. Sector earnings are projected to jump 12.1% on 10.9% higher sales, a testament to AI monetization and robust enterprise demand. After early-year estimate cuts, tech revisions have now stabilized, setting the stage for potential upside surprises.
As I discussed in my Investing.com piece, tech's transformation from heavy AI investment to real profitability is coming into focus. Nvidia ($NVDA ( ▲ 1.09% )) , Microsoft ($MSFT ( ▼ 0.44% )) (July 29), and Apple ($AAPL ( ▲ 0.95% )) (July 31) will be critical bellwethers. Strong guidance from these names could push the S&P closer to my 6,500 year-end target and set us up for 7,000 by mid-2026.
Other Notable Developments
Merck announced a $10 billion acquisition of Verona Pharma, shoring up its respiratory pipeline as key patents expire. Meanwhile, Meta took a surprise 3% stake in EssilorLuxottica, betting big on the AI wearables trend.
Apple named longtime executive Sabih Khan as its new COO, signaling operational continuity. On the legal front, Johnson & Johnson blocked generic competition to its blockbuster schizophrenia drug, providing a near-term revenue cushion.
Copper’s spike after Trump’s tariff threat serves as a reminder that commodity volatility is alive and well. Energy markets also remain in focus after renewed Red Sea tensions lifted oil prices.
My Positioning and Outlook
I remain overweight:
Technology and AI (particularly software and cybersecurity)
Financials (stability and capital returns)
Nuclear Energy (AI power backbone)
Select digital assets (tailwinds from regulatory clarity)
While headline volatility can create noise, the fundamental backdrop, strong earnings, resilient consumers, and policy support, continues to argue for a bullish medium-term outlook. Any dips tied to trade or Fed headlines should be viewed as opportunities to build positions selectively.
Final Thoughts
We’re entering the heart of earnings season against a backdrop of tariff theatrics and central bank caution. But markets are showing resilience, and underlying fundamentals are robust.
My S&P 500 target remains 6,500 for year-end, with a potential stretch to 7,000 by mid-2026 if tech earnings and forward guidance deliver.
Stay nimble, stay opportunistic, and remember, markets climb a wall of worry, and we’re scaling it in real time.
Please feel free to reach out to me on LinkedIn or by email if you'd like help navigating this environment or have any planning questions.
Dan Sheehan
This newsletter is for informational purposes only and should not be considered investment advice. Please consult your financial advisor about your specific situation.