Q2 Earnings: Bulls Welcome Another Low Bar, But Watch Out For Tariff Margin Compression

Rough start to the current week nowithstanding, the S&P 500 entered 4th of July weekend with a bang clocking another ATH of 6279 on July 3rd’s shortened trading session. Sentiment is simple: as Goldman trader John Flood puts it, "Don’t fight the positive momentum at the broader index level just yet as there are multiple tailwinds out there right now: solid economic data (last week job creation and the services ISM both exceeded expectations while inflation cooled), hints of a dovish shift in Fed rhetoric, the passing of the reconciliation bill, cooling of geopolitical tensions, continued AI momentum, and a relentless retail bid."

At the same time, as Trump just reminded the world, trade is again in the limelight this week with the reciprocal tariff suspension deadline coming on the evening of July 8th into the morning of July 9th (the assumption is that the July 8th/9th deadline will be extended and/or a series of deals announced with tariff rates set somewhere between the UK and Vietnam, i.e. 10-20%). Meanwhile, Trump just announced that tariffs with Japan and South Korea will spring back to 25% starting August 1 as no deal was reached in the past 90 days.