Published July 11, 2025
Below is a summary article from MarketWatch and HSBC bank discussing why the stock market is hitting new highs despite continued trade tariff uncertainty.
“The moving target that is U.S. trade policy has been moving quite a bit this week, and the latest maneuvers from the leader of the free world has financial markets on the back foot this morning.
Not everyone is worried. “But to us and from a market perspective, the tariff debate has been thoroughly pushed to the background with the U.S.-China trade pause,” say strategists at HSBC led by Max Kettner, chief multi-asset strategist at HSBC. “Similarly, recent price action is showing smaller sensitivity of risk assets to tariff headlines.”
The U.S. economy, they point out, seems to be doing well — consumer spending in particular has rebounded — and consensus forecasts may be too pessimistic. “Such low forecasts of course lower the bar for positive surprises and in turn further positive revisions, which would then be another positive catalyst for risk assets,” they say.
While inflation could be sparked from tariffs, so far it hasn’t, and if anything prices seem to be cooling, they say. The other benefit from tariffs is that it keeps sentiment and positioning in line.
With corporate earnings season about to start in earnest next week, the strategists say the consensus for a quarter-on-quarter decline doesn’t make sense. “Again, we disagree. Cuts to earnings estimates over the past few months have been the most significant in three years. Front-loading of activity should also mean at least a temporary bump in [earnings per share] in Q2, not a sequential decline,” they say.
But surely, the market is expensive, right? Not really, they say — on an equal-weighted basis, the S&P 500 is trading only slightly above its long-term average.
HSBC strategists bring their views together by saying some of the biggest pain trades involve the U.S. “Whether it is the wide-spread idea of a significant slowdown of U.S. growth, a further weakening of the [U.S. dollar], or U.S. equities continuing to underperform in H2, all of these are quite widely held views,” they say.
Robin Brooks, senior fellow at the Brookings Institution, makes a similar point to HSBC as he points out the different reaction in the U.S. dollar now versus April to tariff developments. “Why is the dollar rising now, as the U.S. announces new tariffs on everyone? Difference is China, which is the only trade war that matters. That confrontation is on hold, so markets don’t care,” he said.”
Market Update
Stocks kicked off the week with -1% losses as President Trump issued new tariff levies on a broad list of nations. The trade uncertainty bled over into Tuesday’s trade with Trump suggesting a 50% tariff on copper imports. Outside of a sharp bump in copper prices, stocks largely shrugged off the trade news closing mostly unchanged. Wednesday brought minutes from the most-recent Federal Reserve meeting. The central bankers appeared open to be warming up to cutting interest rates. Bond market optimism was further stoked by a solid U.S. Treasury auction in the afternoon. Nvidia’s shares rose to put the company’s valuation above $4 Trillion, the first company to hit that milestone. The Nasdaq closed up +0.9% on the strength. Stocks pushed further into record territory Thursday as the stock rally continued to broaden. For example, in Thursday’s action, healthcare, consumer discretionary, and real estate were all higher by +1% while tech stocks showed little movement. Friday saw a slight downtick with Trump continuing to issue trade warnings and interest rates rising as a result.
Stocks ran in place this week with all three indexes marking no real movement from their Monday opening values. That left the S&P 500 down a scant -0.28% while the Nasdaq 100 (QQQ) was off -0.36%. Small caps closed the week down -0.62% but holding their breakout from the prior week.
Warm wishes and until next week.