If the US-UK trade negotiation sets a precedent, and all tariffs go to 10% ex-China, it’s still troubling for S&P 500 profits, underscoring the importance of a fruitful negotiation this weekend.
I had not updated this one in a while, but the NY Fed's "Probability Of A Recession In The Next 12 Months" model pegs the odds of a nasty downturn at 60% (teal line on this chart).
Trump's tariff theory suggests that by placing substantial costs on imports, it can alter the competitive dynamics in manufacturing, especially in the automotive sector.
Whether to maintain such a high allocation to US stocks, as seen in the MSCI AC World benchmark (currently around 64%), depends on how likely an investor believes the realization of the massive growth expectations for the "Magnificent 7" stocks will be in the coming years.
Last week I highlighted the constructive sentiment backdrop from both the Investors Intelligence (II) and American Association of Individual Investors (AAII) surveys. Both continue to show more bears than bulls, which from a contrarian standpoint can be seen as constructive.
