T&Q Morning Briefing

Markets continue to climb the wall of worry. Record highs for the S&P and Nasdaq have brushed off deeper concerns around tariffs, monetary policy, and global instability. Strong retail sales and labor market data are holding recession fears at bay for now. However, sentiment indicators are softening, Fed officials are diverging, and geopolitical flashpoints are multiplying. Expect volatility to rise as we approach August.

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The Recession that Won’t Arrive
According to the latest WSJ survey, economists now see only a 20% chance of a recession within the next 12 months—the lowest reading in over two years. The labor market remains resilient, retail sales are strong, and GDP projections, while slowing, still point to modest growth. The market seems to have accepted that this cycle is different—but expectations may be running ahead of reality.

Tariffs Already in the Price
With the August 1 deadline looming, investors appear largely unfazed by the next round of Trump tariffs. Retailers and importers have already started adapting—raising prices, rerouting supply chains, or front-loading shipments. Markets may be betting that consumer demand will absorb the cost. But if tariffs hit durable goods and staples harder than expected, the second half of the year could bring surprises.

Fed Split Widens
Fed Governor Chris Waller urged immediate rate cuts, citing softening labor data and tariff-related risks. Other officials remain cautious. The Fed’s July meeting is shaping up to be contentious, with markets now pricing in higher odds of a September cut instead. As inflation stabilizes but does not fall meaningfully, the question becomes less about “if” and more about “when and how many.”

Rail Merger Signals Supply Chain Realignment
Union Pacific and Norfolk Southern are in talks to create the first coast-to-coast U.S. rail line. A transcontinental merger would mark a structural shift in how goods move across America—and potentially a response to geopolitical friction and reshoring. It’s also a vote of confidence in long-term demand, even as near-term goods movement has been uneven.

Crypto: From Fringe to Framework
The House passed a sweeping crypto bill expanding the CFTC’s oversight. With stablecoins now federally recognized and total crypto market cap crossing $4 trillion, digital assets are rapidly moving from speculative fringe to regulated asset class. The SEC is also weighing an “innovation exception” that could further legitimize next-gen finance. Despite the pullback in Bitcoin, momentum continues to build.

Previous Trading Day Recap
Stocks closed higher again on Thursday, with the S&P 500 and Nasdaq logging new record highs. Investor sentiment was bolstered by solid labor market data, robust retail sales, and dovish signals from Fed officials. Financials and tech led the rally, while healthcare and real estate lagged.

Treasury yields were little changed, with the 10-year at 4.46%. Oil prices rose on geopolitical concerns after Israeli airstrikes in Syria, while gold continued its retreat. The dollar strengthened against major peers on the back of stronger U.S. economic data. Breadth was positive but narrowing, with mega-cap tech doing much of the heavy lifting.

Economic Data

Earnings

Markets are rising, but so are the questions. Is this a soft landing in motion or a case of misplaced confidence? With tariffs, central bank inflection points, and global flashpoints in play, now is not the time to chase. It’s the time to watch who’s doing the heavy lifting—and prepare for a shift in tone as August approaches.