- Markets are mostly maintaining their all-time highs despite Trump’s tariffs, threats to Fed independence, and analysts reducing their expectations for U.S. GDP growth. Investors are instead enjoying a “Goldilocks scenario,” Goldman Sachs says. Barclays agrees: “Another week, another tariff salvo, and another market shrug.”
S&P 500 futures are barely moving this morning after the index itself hit an all-time high yesterday, poking its head above 6,300 for the first time ever and closing at 6,305.6.
In Asia and Europe, there was a small amount of profit-taking earlier today but nothing to be concerned about—equities remain mostly near their record peaks globally.
There is no excuse for this behavior, arguably. There are three bearish indicators that ought to be scaring investors right now: The U.S. is imposing a trade tax on the entire planet; President Trump has threatened the independence of the Federal Reserve; and Goldman Sachs just moved down its forecast for U.S. GDP in the second half of the year (to 1.1%).
But, as Goldman’s Christian Mueller-Glissmann told clients in a recent note seen by Fortune, the markets appear to be ignoring this and enjoying a “Goldilocks scenario” instead.
“Another week, another tariff salvo, and another market shrug,” Barclays analyst Christian Keller et al. told their clients. “Resilient US consumer data and robust Q2 earnings for now dominate over initial signs of tariff effects on CPI, continuing threats of tariff escalations and increasing political pressures on the Fed.”
There are reasons to worry that stocks might be overpriced. Deutsche Bank’s Henry Allen pointed out recently that the Fed Funds futures speculators are betting in a way that suggests they expect an upcoming recession. “If we look at Fed funds futures as of last night’s close, we can see that just over 100bps of cuts are priced in over the next year to August 2026. That comes on top of 100bps already delivered between Sep-Dec 2024. So, if realised, that would be just over 200bps of cuts in two years. But historically, getting 200bps of cuts in two years has almost always required a recession,” he wrote in a research note.
Maybe. It’s worth remembering that the Fed Funds futures market changes daily, sometimes moving quite dramatically. These investors may not literally be pricing in a recession. But they are certainly betting that Fed Chair Jerome Powell will deliver cuts to interest rates sooner or later. More cheap money is good for stocks, and that’s what stocks seem to be reflecting right now.
Here’s a snapshot of the action prior to the opening bell in New York:
- S&P 500 futures were off 0.13% this morning after the index hit a new high, at 6,305.60, up 0.14% yesterday. The S&P has never been above 6,300 before.
- The UK’s FTSE 100 was clinging on above 9,000, at 9,008.61 in early trading.
- STOXX Europe 600 was down 0.44% in early trading.
- Japan’s Nikkei 225 was down 0.11%.
- China’s CSI 300 Index was up 0.8%.
- Bitcoin is still above $118K.
