Tariff Concerns and 'Inflation Propagandists' Can't Stop This Market Uptrend
The bears have compelling arguments, but continue to be run over by positive price action.
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After shaking off speculation about the possible firing of Fed Chair Jerome Powell on Wednesday, market action is mixed Thursday morning. The better-than-expected PPI report dampened some concerns about inflation and left the bears with little ammunition to press for the corrective action they are convinced is about to hit at any time.
Late on Wednesday, President Trump indicated he plans to write to "well over 150 countries" that he plans to impose blanket unilateral tariff rates of 10% to 15%. A month ago, that news would have likely sent the market sharply lower, but tariff news is no longer having much impact. While one reason is that these threats appear to be primarily negotiating tactics, the main one is that tariffs do not seem to be having any significant negative effect on the economy.
The bears are still absolutely convinced that tariffs will cause inflation to leak into the economy, despite very little hard evidence at this point. There were a few subtle signs of increased inflation in the CPI report in areas like toys and home furnishings, but the PPI came in at 0% and prompted Treasury Secretary Bessent to post on X: “Once again, the inflation propagandists have been proven wrong.”
There is retail sales data due on Thursday morning at 8.30 a.m. ET as well as weekly unemployment claims that will receive attention, but it's inflation that is the only thing that appears to be able to derail this market. On Friday, the University of Michigan Sentiment report is due out, which will provide interesting insight into whether the average consumer is worrying about the same issues as the economic bears.
Netflix NFLX reports earnings on Thursday night. GE Aerospace GE and PepsiCo PEP have posted good earnings on Thursday morning and are trading higher. The reaction here will provide a better understanding of the themes that may emerge this quarter as we move beyond the big banks. Next week the technology reports will start to roll in and will give us some insight into how the market feels about valuations.
Technically, the indexes are sitting just under recent highs and appear to have some support as they consolidate gains and await some news catalysts. The bears still have plenty of doom-and-gloom arguments, but the bulls are unconcerned and continue to look for opportunities to put more capital to work.
At the time of publication, Rev Shark had no positions in any securities mentioned.
