Markets shake off tariff headlines — for now
By Thierry Hasse, Chief Investment Officer
Markets opened the week on firmer footing, defying expectations after a weekend of heated trade rhetoric and speculation about new sanctions on Russia. Futures had pointed to a cautious start, but investor sentiment recovered quickly after the bell, reminding us that headline risk doesn’t always translate into immediate market reaction.
Still, with tariffs climbing, the latest Consumer Price Index due out Tuesday and global policy uncertainty rising, the question remains: How long can this calm last?
The Calm Above the Surface
Chief Investment Officer Thierry Hasse
Markets have remained near record territory in recent weeks, even as trade tensions escalated, first with Thursday’s announcement of a 35% tariff on Canadian imports, followed by Saturday’s threats of additional tariffs: 30% on goods from Mexico and 50% on Brazilian exports. So far, investor sentiment has remained steady, and consumer spending has yet to show signs of strain.
That resilience is notable. Policy moves like these often introduce uncertainty into both markets and households. But for now, investors have focused more on momentum than on risk. Still, underneath the surface, there are growing concerns that higher tariffs could translate into slower growth, squeezed corporate margins and eventually higher costs for consumers.
Inflation Has Stayed Contained — So Far
Despite fears that tariffs would lead to a significant spike in prices, inflation has remained relatively subdued. According to the Bureau of Labor Statistics, the Consumer Price Index (CPI) showed year-over-year increases of 2.3% in May and 2.4% in June, levels close to four-year lows.
But some of that stability may be temporary. Several factors have delayed the full impact of tariffs:
- Phased implementation: Tariffs were introduced in waves—beginning with Chinese electronics in February, steel and aluminum in March and a broader set of consumer goods in April. This staggered rollout has slowed the pass-through effect to consumer prices, delaying when and how the impact shows up in inflation data.
- Not all tariffs have taken effect: Many of the so-called “Liberation Day” announcements from early April were paused or delayed, and several remain under negotiation. As of this writing, 103 days later, only two new trade agreements — with the UK and Vietnam — have been finalized. Until additional deals are signed or tariffs are officially enforced, much of the policy remains headline risk rather than economic reality.
- Supply chain lag: It can take weeks for goods shipped from overseas to reach U.S. ports and show up in consumer prices.
- Inventory stockpiling: Importers moved quickly to front-load shipments early in the year, softening the immediate blow.
- Cost absorption: Foreign exporters and U.S. businesses are absorbing some of the added costs — reluctant to raise prices for consumers still grappling with post-pandemic inflation.
- Inflation composition: Goods make up only about 30% of the inflation basket. Slowing rent increases and falling gas prices have helped offset goods-related pressures.
What We’re Watching This Week: CPI and Earnings
The next key moment arrives Tuesday, July 15, when the Bureau of Labor Statistics releases the June CPI report. With the effective U.S. tariff rate now approaching 15% (up from just 2% last year), this data could mark a turning point.
If inflation begins to re-accelerate, it may reshape expectations for Federal Reserve policy. Rate cuts, anticipated by some market participants, become harder to justify in a rising-price environment.
At the same time, the second-quarter earnings season begins in earnest. Investors will be listening closely to corporate leaders for insights into how tariffs are impacting bottom lines, and whether companies expect continued pressure in the second half of the year.
Why It Matters to You
Even if market indices remain strong, economic shifts like these can ripple into everyday life. Here’s what to keep in mind:
- Your budget: Rising tariffs may lead to higher costs for essentials — from groceries to durable goods — as we move into the fall. Now is a good time to check in on your spending priorities and habits. Small, intentional adjustments today can help you avoid dipping into emergency reserves or disrupting longer-term savings goals if day-to-day costs rise, and reduce the feeling of being financially squeezed when unexpected expenses show up.
- Your portfolio: Market resilience isn’t a guarantee. If inflation picks up or corporate profits falter, volatility could return. That’s why ensuring you and your advisor are on the same page about your true risk tolerance is so important — especially before markets test it.
- Your plan: Fear is a natural response to uncertainty. But decisions made in fear often lead investors off course. Having a strategy you understand — and believe in — can help you stay grounded when headlines turn negative.
Filtering the Noise, Focusing on You
At Elevage Partners, we know that confidence in your plan comes from more than just performance. It comes from preparation, communication and a deep understanding of what matters most to you.
As the inflation report and earnings season unfolds, we’re staying focused on how policy shifts may impact markets, and equally important, how they intersect with your financial goals and tolerance for risk.
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