Tariff Tightrope: Will Markets Slip?

Markets are riding a tariff tightrope as traders weigh rising rates, inflation concerns, and looming trade pressures. Host Jeff Praissman talks with Scott Bauer, reporting live from the CBOE floor, about why volatility feels too calm- and what could make it snap.

Summary – IBKR Podcasts Ep. 274

The following is a summary of a live audio recording and may contain errors in spelling or grammar. Although IBKR has edited for clarity no material changes have been made.

Jeff Praissman 

Hi everyone. This is Jeff Praissman with Interactive Brokers, and it’s my pleasure to welcome back to our podcast Scott Bauer from Prosper Trading. Hey Scott, how are you? 

Scott Bauer 

Great. How are you, Jeff? 

Jeff Praissman 

I’m good, I’m good. Always glad to have you coming in live from the floor of the CBOE. We’re going to do our five‑minute chat on how the market’s doing. Scott, how do you assess the overall market sentiment right now? 

Scott Bauer 

I think it’s very cautious. And that’s not just talking to the traders here—I think overall, everybody is cautious. Especially with the new inflation data we got yesterday and today; it shows that we’re not really getting closer to that 2%. In fact, there’s definitely some concern out there that tariffs are going to put a lot of pressure on inflation. We’re seeing that reflected in what’s trading in the bond market, with rates moving higher. So I think there is some caution, especially with the markets pretty much near all‑time highs. 

Jeff Praissman 

Yeah, you mentioned inflation and rates. Are there any other key catalysts coming up in the near term that could move the market, or any other economic data that’s going to be released over the next week? 

Scott Bauer 

Sure. We certainly have earnings—earnings are in full force. We kicked off with the banks. They’ve been, I’d say, pretty marginal across the board, not anything really outside of what was expected. But we are going to get a lot of the big names, a lot of the tech names, coming out over the next week or so. That can really set the stage for that August 1st date, where those tariffs are coming in. So I think people are really looking at earnings. They’re also looking to the Fed, which meets at the end of the month, but they’re not looking to see if the Fed’s going to do anything right now. The markets are basically pricing in a 0% chance that they will. But what traders are watching is what the Fed says about this recent inflationary data, and what that means for the potential of a rate cut at the next meeting, which is in September. 

Jeff Praissman 

Yeah. And as I mentioned earlier, you’re coming live from the floor of the CBOE, and it looks pretty active behind you today. What have the traders been talking about? I can see everyone is humming, rocking, and rolling. 

Scott Bauer 

It really is, and it’s been pretty slow recently. But today it is pretty busy. The traders are saying the same thing—volatility seems to be a little bit low. They’re feeling the same thing, whether you’re measuring it by S&P volatility or the VIX, which is right over here. So they’re a little bit cautious. Everyone I have spoken with—their bias is to the upside right now, but that is while having downside protection, because they do feel like at any time we could get some headline. Whether it’s tariff‑related, interest‑rate‑related, earnings, or another big announcement from NVIDIA or something else, they do feel that at any one time we could get some news that could take the market down three to five percent, even though they’re leaning toward the bullish side. 

Jeff Praissman 

Yeah, and that kind of leads me right into my next question. I know you’re coming right from the VIX pit, and it’s been moving along since its high of—I think it hit a little bit over 50 back in April. Are the traders expecting another pop? I’m not saying 50—maybe above 20, like last month—or do they just think it’s going to be a calm summer through August?

Scott Bauer  

You know what, it’s hard to fight the tape, as we would say, but the traders do feel like there is going to be a pop. It is too low. When we look at the VIX—that benchmark of VIX at 16 represents a daily move in the S&Ps of about 1%. Recently, over the last week or two, we haven’t seen those big moves we saw over the last several months. I’m looking up here right now—we’re seeing a VIX trading around 17, which is probably fairly priced for how the market is trading right now. But everyone out there, like I was saying about the S&P traders and the VIX traders too, they are long some further‑out upside VIX calls just in case. 

Jeff Praissman 

Got it, got it. And Scott, any final thoughts you want to leave us with on the market behavior for next week? 

Scott Bauer 

I still think that we’re too consolidated. To me, there’s so much headline risk to the marketplace right now, both to the upside and the downside, that volatility is just too low. So I think if someone has a position or a portfolio and you want to stay long in the market—great. I have no problem with that; I have my own positions also. But to me it’s still a perfect time to buy some of that protection. Buy that cheap insurance, as we’ve talked about before, Jeff. Buy when you can, not when you have to. 

Jeff Praissman 

Scott, thank you for stopping by. And for our listeners, you can get more from Scott at ProsperTrading.com. Always a pleasure to have you on the IBKR Podcast Studio Show, and until next time—looking forward to it, Scott. 

Scott Bauer 

Thanks so much for the opportunity. You too. 

Jeff Praissman 

Alright.