Tariff Threats (LOL?) – MONDAY – July 7, 2025

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Dear Valued Clients and Friends –

Another Monday, another threat of tariffs, but a lot less market care.  All this and more in today’s Dividend Cafe!

Dividend Cafe on Friday looked at the history of financial bubbles, the lessons to be learned from financial bubbles, and a current assessment of bubble risk.  The written version is here (my favorite), the video is here, and the podcast is here.

Off we go …

Market Action

  • Markets opened down about a hundred points this morning after the long holiday weekend and worsened throughout the day behind increasing trade/tariff volatility.  They improved off of their lows in the final hour or so of trading.
  • The Dow closed down -422 points (-0.94%) with the S&P 500 down -0.79% and the Nasdaq down -0.92%

*CNBC, DJIA, July 7, 2025

  • While late June saw market strength focused in big tech and early July saw a rotation into other parts of the market, the reality is that market internals are pretty broad, right now – with over 80% of the names in the S&P 500 trading above their 50-day moving average.
  • The ten-year bond yield closed today at 4.38%, up four basis points on the day.
  • Top-performing sector for the day: Utilities (+0.17%)
  • Bottom-performing sector for the day: Consumer Discretionary (-1.26%)
  • Peter Boockvar pointed out this morning that one of the more “bullish” things about this recent market rally was that it was happening from a lot of “bearish” sentiment (which is always true for us contrarians).  That said, the sentiment has, shall we say, reversed, with the highest spread between bulls and bears since January in the recent AAII Survey.  The Manager Exposure Index is at its highest level since July of last year.  And the CNN Fear/Greed Index (which combines seven different indicators) is now at an Extreme Greed reading.

Top News Stories

  • I simply can’t even go there on the flash flooding in Central Texas that has now claimed the lives of 82 people and counting.  It is just an unspeakable tragedy, and I am unable to get through any article I try to read about it.  Words can’t do justice to the emotions around this devastating event.

New Tax Bill

  • Yes, the bill was signed into law Friday.  No, it was not a market-impact event (as has been long asserted here in the Dividend Cafe).
  • Yes, there is a lot to say about the bill that is good, and yes, there is a lot to say about the bill that is bad.  I will devote this Friday’s Dividend Cafe to a more focused deep dive on the bill.

Public Policy

  • The July 9 tariff deadline has been moved to August 1, with that date apparently flexible as well.
  • The 10% tariff rate with the UK (where we run a trade surplus) and a 20% rate with Vietnam (where we run a trade deficit) seem to provide an indicative floor and ceiling of expected tariff rates with other nations.  What can’t be captured is the vast amount of exceptions, waivers, and exemptions
  • Markets took an additional dive down mid-morning today when President Trump announced a 25% tariff on Japan and South Korea starting August 1.  Markets obviously are so used to these announcements and threats that they do not quite respond the way they used to.
  • President Trump has threatened additional 10% tariffs on BRICS countries if they “do anti-American policies.”  No specifics were given as to what that means.

Economic Front

  • The jobs number came in at 147,000 for June, well above the 106,000 consensus.  The unemployment rate declined to 4.1%.
  • Most of the gains were in the governmental sector, which may surprise people who expected to see DOGE layoffs, but the state and local governmental hiring is the reason for this.
  • There was also a decline in private sector hours worked, which dampens the enthusiasm of the report a bit.
  • The labor force dropped 130,000 on the month, which is why the unemployment rate ticked down.  The direction of the labor participation force is the most distressing data point out there.
  • The trade deficit came in at $71.5 billion for May, with exports down by $11.6 billion and imports down by $0.3 billion.  Imports had jumped in Q1 in advance of anticipated tariffs, and Q2 saw much of this reverse.  Total trade was down $11.9 billion.
  • ISM Non-Manufacturing came in at 50.8, bringing Services back into expansion mode (barely), as Services had declined in May.  New Orders and Business Activity expanded while Employment Index and Supplier Deliveries declined.
  • 45 million people have a student loan with the federally-managed student loan universe (the private student loan market is almost non-existent).  24% of those 45 million borrowers are currently delinquent.

Federal Reserve

  • Don’t look now, but we are very close to 100% odds in the futures market of no rate cut here in July.
  • We remain at 65% for a cut in September.
  • And we remain at 75% that there will be two (44%) or three (28%) cuts by the end of the year.

Oil and Energy

  • WTI Crude closed at $68, up +1.5% on the day.
  • The U.S. was a net exporter of petroleum for the 39th month in a row.
  • Midstream energy rallied in June but not enough to make up for the drop in April, so the sector finished Q2 barely down on the quarter, it’s first negative quarter as a group in nearly three years (had been eleven quarters in a row of positive returns).

Ask TBG

“I have heard your thoughts on the budget deficit and agree that it is illogical to increase the deficit. However, the big, beautiful bill was still passed. Despite the budget deficit’s impending impact, do you think that corporations will find relief and an increase in investment spending due to the stability that comes with the bill being passed? Overall, would you say this is a short term positive/negative?”
~ S.P.
I do not think there is added stability coming from the bill being passed because I do not think there was measurable economic instability from the bill not being passed, in the sense that I think markets always knew some bill was going to be passed.  On the margin, there is more stability now than there was four days ago, but it is minimal.  This leaves us to measure your last question on the merits of the bill itself.

  1. Extension of tax rates from 2017 – always believed to be inevitable – a positive
  2. Lack of interaction with long-term deficit spending levels – a negative
  3. Some of the business tax aspects of the bill – a positive

On Deck

  • This Friday’s Dividend Cafe will be an exhaustive summary of the OBBB Act (new tax and spending law signed by the President Friday), and it will not be like any summary you have read anywhere else.
  • Clients will receive their weekly portfolio holdings report on Wednesday

Reach out with any questions, and I shall see you tomorrow in the daily blurb.

With regards,

David L. Bahnsen
Chief Investment Officer, Managing Partner

The Bahnsen Group
www.thebahnsengroup.com

The Dividend Cafe features research from S&P, Baird, Barclays, Goldman Sachs, and the IRN research platform of FactSet.

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About the Author
David L. Bahnsen
FOUNDER, MANAGING PARTNER, AND CHIEF INVESTMENT OFFICER

He is a frequent guest on CNBC, Bloomberg, Fox News, and Fox Business, and is a regular contributor to National Review. David is a founding Trustee for Pacifica Christian High School of Orange County and serves on the Board of Directors for the Acton Institute.

He is the author of several best-selling books including Crisis of Responsibility: Our Cultural Addiction to Blame and How You Can Cure It (2018), The Case for Dividend Growth: Investing in a Post-Crisis World (2019), and There’s No Free Lunch: 250 Economic Truths (2021).  His newest book, Full-Time: Work and the Meaning of Life, was released in February 2024.

The Bahnsen Group is registered with Hightower Advisors, LLC, an SEC registered investment adviser. Registration as an investment adviser does not imply a certain level of skill or training. Securities are offered through Hightower Securities, LLC, member FINRA and SIPC. Advisory services are offered through Hightower Advisors, LLC.

This is not an offer to buy or sell securities. No investment process is free of risk, and there is no guarantee that the investment process or the investment opportunities referenced herein will be profitable. Past performance is not indicative of current or future performance and is not a guarantee. The investment opportunities referenced herein may not be suitable for all investors.

All data and information reference herein are from sources believed to be reliable. Any opinions, news, research, analyses, prices, or other information contained in this research is provided as general market commentary, it does not constitute investment advice. The team and HighTower shall not in any way be liable for claims, and make no expressed or implied representations or warranties as to the accuracy or completeness of the data and other information, or for statements or errors contained in or omissions from the obtained data and information referenced herein. The data and information are provided as of the date referenced. Such data and information are subject to change without notice.

Third-party links and references are provided solely to share social, cultural and educational information. Any reference in this post to any person, or organization, or activities, products, or services related to such person or organization, or any linkages from this post to the web site of another party, do not constitute or imply the endorsement, recommendation, or favoring of The Bahnsen Group or Hightower Advisors, LLC, or any of its affiliates, employees or contractors acting on their behalf. Hightower Advisors, LLC, do not guarantee the accuracy or safety of any linked site.

Hightower Advisors do not provide tax or legal advice. This material was not intended or written to be used or presented to any entity as tax advice or tax information. Tax laws vary based on the client’s individual circumstances and can change at any time without notice. Clients are urged to consult their tax or legal advisor for related questions.

This document was created for informational purposes only; the opinions expressed are solely those of the team and do not represent those of HighTower Advisors, LLC, or any of its affiliates.

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