A Short Week, With Very Large Implications
There's a lot happening on the domestic and geopolitical fronts this holiday week. Here are my thoughts on Iran, NATO, tariffs, the Fed, animal spirits and what I'd be buying right now.
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I continue to watch things unfold geopolitically and domestically.
Iran and NATO
The attack on Iran and virtually every NATO member agreeing to pay 5% are victories for the Trump administration. They should impact negotiations, on a multitude of fronts, positively. Winning can be contagious. This administration needed some “big” international wins and seems to have gotten them. Peace Through Strength will take time, but it is good to see progress on that front.
My stance on the attacks has been that not only was serious damage done, but an incredibly powerful message was sent not just to Iran, but to all of America’s adversaries.
Passing the 'Big Beautiful Bill' Is Critical
I don’t really care if the July 4th “deadline” is met. It was an aggressive target and we are “in the zone.” I am less concerned about the details of any bill, than getting something through the House and Senate and passing as a real, honest-to-goodness law, rather than yet another Executive Order.
It seems like the administration will have to use some more goodwill to push this through, but it is well worth it, in my opinion. It would be a big step towards boosting consumer and corporate confidence. We can all work around the new rules.
This Week Should Re-Shape the Fed Narrative
We get a LOT of jobs data this week and I expect it to be weak.
We should get a lot more discussions about tariffs and inflation and, in my opinion, the Fed is too worried about the potential inflationary aspects and not worried enough about jobs.
Tariff mitigation is occurring, in a variety of ways, which will reduce the impact of tariffs. It will take time for any price increases to reach the consumer. So far, tariff revenue is about $80 billion in three months, hardly “inflationary” in a $30 trillion economy, and actually will help reduce the deficit.
I also like the potential idea that the Treasury will issue much shorter maturity debt while they (like I) believe the Fed is behind and that there is too much angst about the deficit — both of which should help yields move lower if we are correct.
Reviving Animal Spirits
While stocks have soared, the consumer and much of corporate America remains cautious.
AI investment has been the dominant theme because it can protect a company whether the economy does well or poorly.
Victories in Iran, with NATO, and getting the Big Beautiful Bill passed, will help "animal spirits" across the board.
Tariffs are a wildcard. More pauses and even a few deals — all good. More threats, escalations, etc., and we could undo some of the good.
Markets will need the animal spirits they have already exhibited to be picked up by the economy. There are plenty of reasons to believe that could occur, with tariff policy probably the biggest threat (it shouldn’t be, but as we saw on Friday afternoon, it could be).
Bottom Line
Look for the economic data to be weak enough that bond yields continue their recent decline.
I would buy commodity stocks and anything affiliated with “National Production for National Security” on any dips.
For the broad rally to continue we need to see positive responses from the Fed and the administration to any weak data — to ignite the consumer and corporate America.
