The inflation data was in line with expectations this morning.
Yields went up. And all sectors on the day were down, except technology.
Is this a Fed policy story or a trade story or a fiscal profligacy story?
Let's take a look at a few charts that might give some clues …
As you can see we have the S&P (broad stocks) sitting on this big trendline that represents the trend from the tariff induced lows of April – a trend that became a V-shaped recovery from the lows. The charts look similar in the Nasdaq (tech), and the Russell (small caps).
Those April lows were marked by a rumor that Trump was considering a 90-day pause. And two days later, the pause was official.
Of course, that 90 days has now been extended to August 1, but not only is the clock ticking, Trump has now (as of yesterday) ramped up new tariff threats — 100% for any countries doing business with Russia, if no deal with Putin within 50 days.
On that note, key to that threat to isolate Russia, is yesterday's news that the U.S. would be supplying arms to Nato. But it's not really news. This is the culmination of Trump's threats several months ago to end U.S. funding for Ukraine, which led to Europe's grand fiscal spending plan to "rearm," which ultimately led to the recent Nato Summit where Europe agreed to raise defense spending from 2% to 5%.
With all of this in mind, the question has been, how will they pay for it?
And with that reality now materializing, we have these two charts today …
This trendline in the euro, which originated from the 800 billion euro plan to "re-arm" Europe, broke today.
And with the euro zone economy facing a deficit-funded defense spending spree and stiff tariff headwinds — this trendline, which originated from the 90-day tariff pause, has already broken in German stocks …
