29.07.25 - Trade deal - new catalysts needed

The US and Europe reached a trade deal over the last weekend. Most European goods, including cars, exported to the US will face a 15% tariff while the Europe agreed to purchase USD 750 billion worth of US energy.

So what could be the next catalyst? This week in July is packed with market-moving events that could set the tone for August:

• Earnings report from more Magnificent 7 companies like Meta, Microsoft, Amazon and Apple

• The Fed rate decision (expected to remain unchanged)

• The PCE Price Index (Personal Consumption Expenditures), the Fed’s preferred inflation reading

• US jobs data for July

Markets: Equity indices higher across the globe with US reaching new records, except some Asian indices this morning - yields tending lower - USD claims back som ground - gold trading above USD 3’300/oz - cryptos taking a breather

My view: Summer season is often characterized by no big market moves. So far no signs of any summer lull. This time is packed full of events which could give markets any direction.
The market was cheering the trade deal only in the first hours. This was not much of surprise to me. European is clearly taking the second seat.
Therefore European economy continues to follow a path on the edge. There is much more room for a downside than upside surprise for the time being.

However, already a day after, markets seem to shrug off the negative news. Just a day after the trade deal headlines, sentiment is back to bullish. This year seems definitely to be different.

What could challenge the rally in the short-term:

• Seasonality: August and September are historically the weakest months of the year

• Valuation seems to be stretched in certain sectors and companies

• Earnings disappointment continues in Europe: Only 55% beat estimates, below average

• Investor sentiment: still hovering at extreme greed levels

• Insider selling: Insider transactions are near record highs - insiders are cashing out

• Fund Manager Survey: latest low cash levels indicate a contrarian signal

• And finally, next to all those financial and macroeconomic and technical events and indicators, we are reaching the 1 August deadline when US President Donald Trump will announce the reciprocal tariffs for the countries without no agreed deal yet - except he is moving the deadline again. Current numbers mentioned are between 15 to 20% tariffs.

Stay tuned and see what the mixed cocktail will bring.

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