Commentary

In last week’s Navellier Market Buzz, we discussed how the stock market is largely ignoring the latest tariff news, such as the 30% tariffs on the European Union (EU) and Mexico, and a whopping 50% tariff on Brazil, all set to begin on August 1^st. Apparently, Wall Street has finally figured out that this is how President Trump negotiates, by making the other side increasingly uncomfortable with new tariff threats.

If the Fed cuts rates on July 30^th, and if the most important tariff treaties are finalized by August 1^st, we may have a strong opening in August, but the main problem I have with August is the fact that Europe and New York City tend to disappear on summer vacations, so the “B team” is left in charge. Trading volume typically declines, so that unscrupulous short sellers often try to manipulate certain stocks. Due to these market shenanigans, I have been calling for the stock market to basically close down during August.

Here are the most important developments recently and what they mean:

- There is no doubt that we are benefitting from the AI revolution and the data center explosion now underway. Due to the passage of the “Big Beautiful” tax bill, more money is being put in consumers’ pockets, so the “velocity of money” is rising and prosperity is expanding. That is the good news. The bad news is the Fed has been a party pooper and ignoring the positive inflation data, since it was anticipating an inflation “bogeyman” that never materialized. Fed Chairman Jerome Powell said at an ECB conference in Portugal that the Fed would have cut it had it not been for the tariffs. Fortunately, there is a growing minority on the FOMC, led by Governor Christopher Waller, that wants to now commence cutting key interest rates.

- The tariff critics were silenced by a June federal budget surplus for the first time since 2017. President Trump’s aggressive tariffs threats are actually forcing our trading partners to reduce their trade barriers, so freer worldwide trade is now unfolding. The onshoring now underway is incredible, which is why I am expecting the U.S. to achieve 5% annual GDP growth in the upcoming years.

- The global interest rate collapse will increasingly put downward pressure on Treasury yields and the Fed, especially as the U.S. dollar rallies and gets its “mojo” back. President Trump’s domestic and international opponents are increasingly trying to humiliate him with endless Jeffrey Epstein allegations, since they cannot criticize him on policy and the U.S. economy. These distractions are not derailing the U.S. economy.

- The only thing that can derail the stock market’s resurgence are seasonal shenanigans. August is a seasonally weak month, but a dovish FOMC statement may help to squelch any negative sentiment. Nvidia and Costco will be the grand finales to this current earnings announcement season. As interest rates collapse, the Fed will be forced to follow other central banks and cut key interest rates multiple times. This “turbo boost” will be the last tidbit to ensure that economic nirvana persists.

- The “Big Beautiful” tax bill eliminated federal penalties for Corporate Average Fuel Economy (CAFE) standards, which means automakers no longer have to comply with mileage mandates. Tesla’s windfall for selling emission credits is now over in the U.S, which may explain why Elon Musk was so mad at President Trump. Despite the CAFE elimination, Stellantis announced that it is taking a $2.7 billion charge for factors ending its hydrogen fuel cell program, program cancellation costs, platform impairments, and restructuring. Stellantis may still have to pay the European Union (EU) a $2.95 billion fine for its emission violations, so it is in the company’s best interest to divert as much of its vehicle production to America to avoid the EU’s oppressive rules.

- The EU is facing up to 30% tariffs on August 1^st if their negotiations with the U.S. do not go well. Commerce Secretary Howard Lutnick on CBS’s Face the Nation said, “I am confident we’ll get a deal done.” Lutnick added that “I think all these key countries will figure out it is better to open their markets to the United States of America than to pay a significant tariff.” Treasury Secretary Scott Bessent said the EU “got out of the blocks in a slow pace” on trade talks before becoming more engaged. He said that given the “gigantic” trade deficit the U.S. has with the EU, and the level of tariffs, “I would imagine that they would want to negotiate faster.” In other words, the Trump Administration’s threat of reciprocal tariffs (above 10% baseline tariffs) should result in freer trade around the world.

In summary, we are truly in a special environment and an economic renaissance for the U.S. While Asia and much of Europe are in the midst of a demographic collapse, the U.S. is better positioned with household formation and better assimilates immigrants. Furthermore, the U.S. is food and energy independent, plus is benefiting from surging exports as well as onshoring. This is why the U.S. dollar suddenly got its “mojo” back, since it is obvious that the tariffs are going to help the U.S. to better manage its budget deficit. Hopefully, all the tariffs will be finalized on August 1^st, the Fed signals that rate cuts will be forthcoming, and virtually all economic uncertainty will end. As estimates for GDP growth steadily rise, I expect both business and consumer confidence will soar.

*Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.