Navigating Trade Deals: The Impact of Tariffs on the Economy

Let's get to the big story breakdown.

While Trump reaching a trade deal with the EU, avoiding a trade war by setting a 15% tariff on European goods as part of the agreement, Europe will buy $750 billion in US energy and invest another $600 billion into the American economy.

Now top trade officials from China and the US have entered the second day of high-level negotiations.

The talks will bring together representatives from world's two largest economies.

Now in a big week for earnings data.

We get PC and jobs and of course the Fed meeting.

Well joining me this morning to weigh in on what we're seeing ahead of a very busy week is Michael Ryan King, senior market strategist at the New York Stock Exchange.

Michael, good morning.

Thank you so much for joining me.

Thanks for having me back.

Well, here we are.

We're looking at a higher open.

The S&P 500 saw yet another record close.

Yesterday, but first and foremost, tell me the impact of these tariff negotiations as well as trade deals when it comes to the economy.

Yeah, so I mean, look, you know, we had the EU announcement yesterday.

We're expecting to hear an extension for the China negotiations to continue, you know, later today, most likely or tomorrow um.

I think markets in general had largely been expecting that, expecting that we would kind of come to come to some sort of agreement, you know, markets had been rallying very consistently for the last few months, continuing to grind higher, so I don't think that it was necessarily kind of a surprise.

I think from here, right, I mean the real question becomes what are the impacts of tariffs now they're Clearly not as bad as kind of feared, you know, but there is a significant increase in terms of what the you know the tariffs that we're going to see kind of across the economy, you know, relative to where we were in January.

So you know you would expect to see in the coming months that's going to start to impact the inflation data likely start to impact you know kind of some of the growth side of the equation and we're just going to need to kind of ride that out.

What that looks, and speaking of which this week is a big week for earnings as well as economic data.

We start out with ADP tomorrow ahead of that jobs report on Friday morning.

So that's something we'll keep an eye on.

But of course the two day Fed meeting and Chair Powell speaking tomorrow.

He is under a lot of pressure, but what are you watching out for this week?

Yes, so I mean, as you pointed out, this is probably the busiest.

Week of the summer.

So we have the labor market data kind of starting this afternoon with the Jolt's jobs openings, ADP, and then BLS on Friday and we have the Fed meeting.

So in terms of the Fed, I think that the real question is, you know, nobody really expects any rate cuts this time around.

The question is whether you start to hear Fed Chair Powell.

More outwardly set the table for a rate cut in the September time frame.

So before the July meeting we suggested that he would start to set the table, but it would be kind of just putting out the tablecloth and kind of the silverware.

At this point we now actually may start to see the plates, right, and they'll start to kind of prepare some of the appetizers.

Potentially for that September cut, right?

They want to see, uh, you know, they've suggested they would like to see two months of inflation data before they'd be ready, right, that'll give them August, September would come, you know, the September data is a week before when when the Federal Reserve meets, right, so they would in theory start, you know, have that data in hand, you know, overall, the inflation.

Data has been better than expected, though you are seeing kind of the good side of the equation has started to move higher and that's where, you know, kind of where they're going to need to kind of pay attention and then the other piece of that is really the labor market data and if we start to see any significant deterioration in that labor market data, which is held up pretty well up until this point.

Yes, and it's also earnings season, Michael, so I do want to get your take on what we've seen so far.

Any surprises or key takeaways?

Yes, look, I think in general the numbers are coming in, you kind of.

As expected, you know, which are, which is, you know, kind of a beat on kind of the top and bottom lines, because as you've had the bar lowered, you know, the difficult piece of that is the price action on the back end, right?

We've had this 25% rally in the S&P, you know, so many times, you know, you're seeing companies put up solid results, you know, like Royal Caribbean this morning is one that comes to mind right where that stock. a very, very big move.

The numbers were pretty solid.

You can poke some holes in some of the guidance, you know, but the stock trades off despite that, right?

We saw kind of GE, the GE aerospace earlier in the earnings season, right?

So it's really kind of the price action, you know, where we've seen kind of markets meeting some of these good numbers. kind of with a little bit of pressure, but as you move kind of a couple of days, a couple days removed from those earnings releases and announcements, right, we've seen the stocks start to trade better.

So if you think of the financials, solid results, muted response, but over the last week they've started to trade higher.

So I think it's give it a little bit of time, don't react just to that first day volatility.

Yeah, and finally, Michael, before I let you go, I do want to ask you about factors in terms of what you're watching for the broader markets.

So when we're talking about growth, value, high dividend, IPOs, momentum, everything is positive year to date, but there's been a spotlight on IPOs, especially given what we're seeing here at the New York Stock Exchange.

So give us an overview of what's taking place here.

Yeah, yeah, so I mean I think we've started to see some of the momentum building, you know, kind of in that kind of capital markets.

Side of things we've heard very positive comments from the banks who've seen stock activity pick up, you know, kind of quite a bit that does tend to be a little bit of a leading indicator in terms of where investment, you know, kind of where you kind of IPO activity is going and we're also starting to see, you know, a pick up of that and we have some kind of exciting IPOs you know this week here at the New York Stock Exchange, you know, in terms of kind of the other factors, what we've started to see right is. there's been a shift kind of out of the speculative risk curve over the last kind of couple weeks, right, so that's raising some, you know, I wouldn't say red flags, but they're yellow flags or orange flags to match my socks, right?

And that's starting to raise some flags, you know, just in terms of where we are in the cycle, but I think more than anything it really just suggests that we're in, you know, in the need of a little bit of consolidation, right, have kind of a Potential kind of correction via time as opposed to.

Yes, well, Michael, thank you so much for joining me.

We'll keep an eye on those levels for the major stock averages as well as the upcoming IPOs here at the exchange.

Thank you so much for joining me.