Good morning Traders, Investors, and Quants — and welcome to the final day of the quarter.

Markets notched new records Friday as tariff risks receded and economic data offered mixed but manageable signals. The S&P 500 is now up 23% from its April low, driven by tech strength, corporate earnings resilience, and hopes that inflation, while sticky, is not spiraling. The T&Q Index remains up over 8% after its first week, a strong validation of the AI and data-driven approach to unearthing market narratives and connections.

Meanwhile, geopolitics are pulling markets in two directions. On one hand, Canada backed off its digital tax after the U.S. terminated trade talks. On the other, big-budget stimulus and election-year populism in Europe, the UK, and the U.S. are making investors question whether fiscal discipline is dead.

With the next major catalyst being Friday’s jobs report, today’s tone is one of cautious continuation.

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Melt-Up or Justified Rally?

U.S. equity markets continued their upward march, with the S&P 500 now up 23% from its April 8 low and setting its 1,245th all-time high since 1957. Friday’s close capped a fifth straight weekly gain as investors balanced softening inflation, resilient consumer demand, and hopes that the Fed can still pull off a soft landing.

The rally is drawing some caution. Market strategists warn of a potential “melt-up,” with euphoric sentiment chasing momentum higher despite mixed fundamentals. Friday’s core PCE data—up 0.2% month-over-month and 2.7% year-over-year—was slightly hotter than expected but within tolerable bounds. UBS raised its S&P year-end target to 6,200, citing manageable tariff fallout and persistent strength in megacap tech.

Under the surface, signs are murkier. Real personal consumption declined 0.3%, and personal income fell 0.4%, suggesting consumers are starting to feel the squeeze. The Chicago PMI and Dallas Fed manufacturing indices due today could confirm whether industrial softness is deepening.

Market breadth still supports the rally, with 2:1 advance/decline ratios and small caps outperforming earlier in the day. But by the close, defensive sectors outperformed growth. Meanwhile, equity volatility remains subdued and deal activity is booming again—dealmakers inked $1.8T in M&A so far this year, suggesting capital markets are adjusting to the new trade and rate regime.

Trade Chess Intensifies

Global trade negotiations continued their complex dance over the weekend. Canada rescinded its controversial digital services tax following the White House’s sudden move to halt trade talks. While the abrupt end to dialogue created momentary market jitters, analysts see the episode as tactical brinkmanship, not breakdown. Most observers now expect a reset of U.S.-Canada terms before year-end.

In Europe, populist fiscal policy is under fire. Germany, France, and Italy have all floated budget-busting stimulus bills in recent weeks, raising concerns among bond investors about Eurozone cohesion. Trump’s G7 diplomacy has been transactional rather than transformative, with key partners conceding narrow wins to avoid broader confrontation. The UK finalized its mini-deal with the U.S., focused on agricultural exports and pharma IP protections.

Russia’s renewed missile campaign in eastern Ukraine has revived NATO cohesion, but the long war’s economic toll is reshaping regional politics. Meanwhile, global supply chains are adapting to the new environment, with firms diversifying trade routes and sourcing amid shifting tariffs and sanctions.

Megabill Showdown and Migration Maneuvers

In Washington, Trump’s tax-and-spending “Megabill” is colliding with party infighting. Senate Republicans remain split over the scale of the proposed tax extensions, especially after the controversial Section 899 “revenge tax” was removed in a late concession to G7 allies. Meanwhile, both parties are grumbling over the AI provisions, with critics saying they’re either underfunded or poorly designed to regulate runaway innovation.

On immigration, Trump said the administration is working on a “temporary pass” program for immigrants in high-need industries—a move seen as a nod to business while maintaining political posture on border control. The proposal follows new Census projections showing population declines across the Rust Belt unless immigration increases.

The Supreme Court surprised observers with a narrow ruling preserving birthright citizenship, rejecting legal arguments that would have undone long-standing precedent. This has added further fuel to the national debate on immigration reform.

Elon Musk continues to criticize the Megabill, especially the rollback of EV subsidies. His opposition underscores the challenge Trump faces in keeping corporate allies onboard while satisfying the GOP base.

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Equities closed higher on Friday, with the S&P 500 and Nasdaq both logging new closing highs despite midday volatility. The day began with strength on easing U.S.-China trade tensions and softer-than-feared PCE inflation data. Markets wobbled midday on news that Trump terminated trade talks with Canada but rebounded in late afternoon trading.

The S&P 500 added 0.11%, the Nasdaq rose 0.08%, and the Russell 2000 slipped 0.52%. Sector breadth was mixed: Industrials, Consumer Discretionary, and Staples led, while Technology and Energy lagged. Treasury yields moved slightly lower, with the 10-year closing at 4.21%. Gold fell 1.8% on risk-on flows, and crude edged up 0.43% as OPEC+ headlines spurred volatility.

The surface is smooth, but crosscurrents are forming.

Inflation, while muted, is no longer falling. Trade policy remains in flux. And consumers are starting to flag. Yet markets are grinding higher, anchored by falling volatility and abundant liquidity.

The second half of 2025 opens with a paradox: calm charts, chaotic headlines.