Adam Phillips: 

Markets continue to trade near all time highs. And last week we saw CNN's Fear and Greed Index hit the highest level in about 52 weeks. We know that famous saying by Warren Buffett that you should be greedy when others are fearful and fearful when others are greedy with this CNN Fear and Greed Index. Entering this extreme greed territory. Is this a sign for us to sell? I don't think it is. We don't necessarily want to take risk off the table here, but we should acknowledge how far we've come. As I said, markets are trading at an all time high. We are about 65 days removed from the low in the markets, which was on April 8th, the day before President Trump announced that 90 day pause on tariffs, which, uh, did end up getting extended until August 1st. And so over that 65 day period, we've seen markets rally about 26% if you're looking at the s and p 500. So that is a very strong rally off of those lows, and we know that there's still plenty of uncertainty that remains. Yet the market still seems to, uh, be dismissing a lot of the near term risks. As I mentioned, the, the trade, that, that pause on tariffs has been extended. Until August 1st, and I think the market is viewing this as really, this is the boy that cried wolf when it comes to this. The market is, is looking at these additional extensions and saying, okay, if we get to August 1st, we still don't have a lot of trade deals. Maybe President Trump will delay again and postpone those tariffs again. Or even better, we'll actually see some trade negotiations and agreements put in place. I think that's the ideal outcome. But for now, the market is really discounting the risks here. so I, this is, all this is doing is it's, it makes us vulnerable here over the near term. If we, if we get to that August 1st, there's no deadlines or excuse me, there, there's no, there's no trade agreements, no extension. 

Then that could be a disappointing outcome for investors. So I think this is really more, of, of a reflection of how far we've come, and it's a reminder that we should acknowledge the vulnerability here. But don't necessarily get too worried. It doesn't necessarily require any changes to a portfolio's allocation. When it comes to tariffs, one of the big questions for us is we know that that daily tariff revenues coming into the US have surged here in recent months. But who is footing the bill? That's the big question. Hopefully we'll start to get some clarity on that. This week are getting the, we're recording this on a Monday. 

I think that's always important to say, given how quickly things move these days. So recording this on a Monday, tomorrow, Tuesday, we are getting the consumer price index, the CPI report. That's the inflation report for the month of June. far, it's been surprising that we haven't seen. Too much pressure on inflation as a result of tariffs. 

I think that was the big concern. It still is a big source of concern, uh, among those at the Fed and, and many economists. So the question is, will we start to see that this month? We are also, we will also see, uh, earnings get underway here later in the week. As usual, it'll start with the banks, uh, and financial institutions and then move on to other sectors. And so we'll see who is footing the bill. Is it consumers? Is it businesses? Is it a mix between the two? If. end up footing the bill that will obviously be inflationary. It will put additional pressure on many households who are already feeling some pain by living in this higher rate environment. it falls on businesses that will hurt the profit outlook and impact profit margins and ultimately weighing on stock prices. So this really is an important question for us to get some clarity on. When it comes to the, the, uh, the corporations and businesses here, I think it's really important to acknowledge since we got this one big, beautiful bill passed last week. This is that we, we talked last week about how this could provide some tailwind to the economy, perhaps not as much as it, as it did, uh, with the tax cuts and jobs act back in 2017. But on net net it will be supportive for the economy. But when we look at tariffs and the impact on businesses, I think it is important to acknowledge that this does, to the extent that that businesses absorb the, the tariffs on their own, it does weigh on, on their profit margins. 

It does serve as a tax. The, uh, at, uh, so, so we import about $3.3 trillion in goods as the economy every year. If we have that 10% universal tariff, let's call it 330. A dollars in, uh, in tariff revenue that is essentially taxed by corporations unless they pass on part of that to consumers. If we just ballpark the effective tariff rate after all these negotiations are put through at 15%, let's call it a $500 billion, uh, a $500 billion, um, uh, billion of tariff revenue coming into the US every year. That is about on par with what corporations pay in taxes every year. And so to use that extreme example, 500 billions in, uh, 500 billion in tariff revenue, that would effectively double the corporate tax rate America. So that is why this question is so important to us, of who is footing the bill? Is it corporations? 

Is it consumers? Not, neither one is good, but I think understanding who is paying for tariffs ultimately will help us determine where the economy is going and what impact it might have on the outlook for equity prices. I'm gonna leave it there for now. If you have any other questions, please feel free to reach out to your financial advisor and I'll see you next week.  

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