Keeping calm amid tariff threats

Today marks the start of a new week for the stock market, but there is a carryover of last week’s tariff letter attention. Another thing carrying over is the stock market’s relative calm amid the president’s tariff letter-writing campaign. Recipients on the hot seat today include Mexico and the EU, both of which will face 30% tariff rates starting August 1 if they cannot work out better trade terms for the U.S. before then.

These are consequential trading partners, yet the disposition of the equity futures market would make one think that they carry a lot less weight on the trade front than they do.

Currently, the S&P 500 futures are down 16 points and are trading 0.3% below fair value, the Nasdaq 100 futures are down 56 points and are trading 0.3% below fair value, and the Dow Jones Industrial Average futures are down 136 points and are trading 0.3% below fair value.

It is a mechanical reaction, with like-minded declines across the equity futures market landscape, which is also to say that there isn’t any significant emotion wrapped up in the trade. It is a fairly calm reaction, all things considered.

That calmness is grounded in a belief that lower tariff rates will be negotiated and that, whatever happens on the tariff front, there won’t be a deleterious impact on the economy or inflation.

Market participants are going to get some key insight this week, and in coming weeks, on whether that view is correct. This is a big week for economic reporting, with June CPI (Tuesday), June PPI (Wednesday), June retail sales (Thursday), and June housing starts (Friday) on the calendar.

It will also be a big week for earnings reporting, starting tomorrow with results from JPMorgan Chase (JPM), Citigroup (C), and Wells Fargo (WFC) before the open. The reporting traction will only pick up from there in a June quarter reporting period that won’t die down until closer to mid-August.

That is a lot of reporting road to cover before then. Key to the near-term outlook isn’t so much what companies say about the second quarter, but rather what they are thinking about the third quarter and beyond.

The S&P 500 is trading with a rich valuation that is riding on strong outlooks. What we said in our earnings preview posted to The Big Picture on Friday is that there is room to run for companies that raise their guidance, room to consolidate for companies that reiterate their guidance, and room for sharp declines for companies that lower their guidance. What that means for the stock market will depend in large part on what companies are sending those messages.

For the time being, the message of the market, which hit record highs last week as more tariff letters were sent, is one of assuredness that economic data, inflation, trade negotiations, and earnings results will all break its way. 

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Originally posted on July 14, 2025 – Keeping calm amid tariff threats