- Another tariff threat, another strong day for U.S. stocks, which swung from a loss to a gain on Monday, with the S&P 500 near its all-time high.
President Donald Trump is taking recent stock-market highs as a sign investors approve of his threats to slap tariffs on trading partners—and so far, the markets are proving him right.
Equities kicked off Monday strong after a fresh round of tariff threats over the weekend. The S&P 500 gained 0.17%, closing within 0.2% several points of its all-time high, set on Thursday. The Dow rose 0.2% and the tech-heavy Nasdaq gained 0.27%.
Trump on Saturday threatened the European Union and Mexico with a 30% tariff. The higher levies would kick in Aug. 1, the same day that reciprocal tariffs with most of the U.S.’s trading partners are set to rise. On Monday, Trump threatened to slap Russia’s trading partners with 100% tariffs if President Vladimir Putin doesn’t end the war in Ukraine within 50 days.
But the markets have learned to ignore such threats, Deutsche Bank’s Jim Reid wrote in a recent note, calling them “mostly a negotiating tactic.”
“If ‘tariff’ isn’t the word of the year for stock investors so far, then perhaps it’s ‘uncertainty,'” LPL Financial wrote in a research note Monday. “Tariffs influence the key drivers of stock market performance: economic and corporate profit growth, inflation, and interest rates. If stocks continue to move higher in the second half of the year, trade policy will need to cooperate.”
While markets so far have been sanguine, data releases this week could upend that. On Tuesday and Thursday, the Labor Department is set to release inflation data for June. Analysts expect it to show consumer inflation accelerated last month from 2.4% to 2.6%.
Earnings season also kicks off this week, with the major U.S. banks reporting their financial results for the previous quarter. This comes after many large companies yanked earnings guidance on the pretext of tariffs, but the results will offer a hint of the answer to the hottest question in the economy: whether companies or consumers are paying the $100 billion in tariffs collected so far by the U.S. Treasury.
“Tariffs are not magically disappearing if they don’t show up in consumer prices but somewhere along the supply chain someone is getting clipped,” Peter Boockvar, chief investment officer at Bleakley Financial Group, said in a note.