Congress passed the tax and spending bill, and the president signed it into law on July 4 but traders have already moved on. They are laser-focused on the July 9 tariff deadline. It doesn't look good.

 

As the holiday weekend begins, President Trump warned the nation that he will be sending letters to 10 or 12 countries starting Friday to notify them of the tariff rates they will face as of August 1. He claimed that by July 9, all nations "will be fully covered. They'll range in value from maybe 60 percent or 70 percent tariffs to 10 percent and 20 percent tariffs."

 

Equity futures, which are open on the July 4 holiday for a half-day, indicate that the indexes were down a little over half a percent on the news after gaining a little more than that by Thursday's close. While these letters appear to be an escalation in Trump's trade war, he has also postponed the deadline for tariff implementation once again, until Aug. 1.

 

Given his track record, most traders are looking to the crypto-based prediction market, Poylmarket, to gauge the chances he will follow through. As of Friday, the odds that Trump will remove most of the reciprocal tariffs before the deadline are 56 percent. Look out below, if that doesn't occur. Of course, in the event of a significant sell-off in the stock or bond market, I expect Trump and his billionaire crew to rapidly change their tune on tariffs as they have done in the past.

 

A deal with Vietnam was announced on Wednesday, marking the second such agreement to date. Imported goods from that country will face a 20 percent tariff, while transshipped goods, those shipped from Vietnam, but originating in another country (like China), will face a 40 percent tariff. U.S. exports to Vietnam would not face a tariff. That is good news, but small potatoes (U.S. exports total $13 billion) compared to what we export to other countries in the European Union ($592 billion) or Japan ($79 billion). The president has already said he doubts a deal with Japan is forthcoming.

 

Regarding the passage of Trump's spending bill, aside from the fact (denied by its legislators) that this so-called "beautiful" bill will increase the U.S. debt load by $3 trillion to $5 trillion over time, it will once again be an exercise in redistributing wealth from the poor to the wealthy. Remember, taxes under this bill will remain the same. They just won't go back up because the bill extends the status quo. There are a few minor exceptions, such as no taxes on tips or overtime for some Americans, and seniors receive a break through tax credits.

 

More than two-thirds of the total tax cuts will continue to benefit those with annual incomes above $217,000. Those making $1.1 million or more will garner one-fourth of the tax benefits. However, the real issue for GOP politicians is the spending cuts. The deep cuts in Medicaid and SNAP programs disproportionally impact working-class voters (defined as those without a college degree). 

 

Those are the voters who put both Donald Trump and a slim majority of Republicans in Congress in power. That is the main reason, aside from the cost of the bill, that the GOP, despite their majority in both houses, have struggled to pass this bill.

 

In 2023, Republicans represented 56 of the 100 lowest-income districts in the House. Republicans are counting on Trump's ability to sway the public to disregard the fine print in the bill. We all know why. Republican politicians worry how 20 million or more Americans, who face a deep decline in their social safety-net programs, will feel about their elected representatives come election time. To avoid that, Republicans deferred their most painful spending cuts until after the midterm elections.

 

In the meantime, the pressure on Fed Chairman Jerome Powell to cut interest rates continues unabated. The spate of weaker inflation data, combined with a recent weakening in economic growth, has prompted more players to follow the president's lead in calling for cuts as early as July. The June labor report punctured that narrative. The non-farm payrolls report was an upside surprise, as the U.S. economy added 147,000 jobs, exceeding the 106,000 that economists had expected. That pushed the headline unemployment rate down to 4.1 percent. It suggests that there is no need for a rate cut at this time.

 

My higher-end target on the S&P 500 Index was exceeded this week. As readers are aware, I have been anticipating a bout of profit-taking in July. Next week, we could see a pullback based on Trump's latest tariff threats. A 2-3 percent sell-off in the averages is possible, which may be a chance for the markets to refuel from overbought levels.

 

And yet, I see no real signs that the bulls want to relinquish their hold on the markets. Seasonally, July is a good month for markets, with an average gain of around 2 percent. In addition, the AAII investor sentiment survey is not nearly as euphoric as it should be, given a 28 percent gain in the stock market from its lows.

 

While there is no sure way to predict an interest rate cut in July or another extension of tariff delays after Aug. 1, either occurrence would send markets higher, possibly into what is called a "blow-off top." If so, this could catapult the S&P to 6,350-6,500 in a relatively short time. As such, over the next two weeks, anything could happen so strap in!

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at [email protected].

Mission accomplished. After a tumultuous six months in 2025, equities managed to overcome every obstacle and closed in on new highs. What does that mean for the second half of the year?

 

The short answer is nothing. We start again. Investors need to take each day as it comes. It is a world where governments have more weight and influence in determining the outcomes of both the economy and the markets than ever before.

 

I hope you read last week's column, "Regional Conflicts Present Buying Opportunities." I reminded investors that recent skirmishes, such as the one between Iran and Israel, usually do not last long and have little bearing on markets three to six months out. This week's cease-fire between the two adversaries is a case in point and is partially responsible for the breakout to new highs we are enjoying today.

 

Kudos to Donald Trump for engineering the circumstances that one can hope will make the Middle East a safer place in the future. And lest you think the president headed off to play golf, think again. He is now brow-beating the Senate to pass his Big Beautiful Bill (BBB) before the Senate's self-imposed deadline of July 4. He has already told legislatures that there will be no vacation days for them until this bill passes.

 

A lot is riding on that bill passing. I believe the market has already discounted its passage, so any hiccups or delays could spark a rush toward the existence. The most significant concern among the dissenting Republican politicians is not the spending part of the bill. Like most politicians, they talk a good show on the need to rein in spending but never do. It is that the cuts in Medicaid and other social programs may hurt some politicians' chances in the next election.

 

As investors await an outcome on that front, the president's feud with Fed Chairman Jerome Powell is intensifying. Readers may recall that Trump appointed Powell to lead the Fed back in 2018. Powell's term does not run out until June 2026. But it appears the president doesn't want to wait that long. This week, he floated the idea that he will name his pick to succeed Powell much earlier than is customary, possibly as early as September or October. Interestingly, several members of the Fed are already auditioning for the job by mimicking Trump's demand that the Fed cut interest rates as early as July.

 

Former Fed Governor Kevin Walsh, National Economic Council Director Kevon Hassett, Treasury Secretary Scott Bessent, Fed Governor Christopher Waller, and former World Bank President David Malpass are reportedly on Trump's shortlist. The thinking is that by naming a successor early, the president would undercut Powell's authority for the remainder of his term.

 

The odds of two rate cuts this year are rising, and stocks are climbing in anticipation that this additional pressure will force Powell to reconsider and reduce interest rates.

 

My two cents is that Powell is correct about waiting. As readers are aware, I expect inflation to rise through the end of the year, possibly reaching 2.9-3 percent by December. The Fed's preferred inflation indicator for May, the Personal Consumption Expenditures (PCE) price index, released on Friday, showed an increase, which was in line with my expectations but higher than the Street's forecasts. At best, we need to wait until we know whether or not Trump will do another TACO (Trump Always Chickens Out) on tariffs in July.

 

All indications are that he will once again postpone. China and the U.S. say they are working toward an agreement on tariffs, and Commerce Secretary Howard Lutnick promises that tariff agreements with 10 nations are "imminent." Treasury Secretary Scott Bessent chimed in by predicting that the U.S. could complete the balance of its most important trade talks by Labor Day.

 

Last week, I worried that the war in the Middle East would screw up my bullish forecast: "That leaves the market's range bound and probably short circuits my hope that we could reach 6,100-6,250 on the S&P 500 anytime soon. Now, don't take that as gospel because events could turn on a dime, propelling stocks higher." That is precisely what occurred.

 

We are within striking distance of 6,250, the high end of my target range. Next week is the end of the second quarter and depending on the headlines on tariffs, the BBB, etc., we could see a blow-off top in the markets.  After that, I am looking for some profit-taking in July and possibly August.

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at [email protected].

Every new headline sends markets this way, with traders caught between a rock and a hard place. Geopolitics, tariffs, and economic data need to play out over the next two weeks before a clear direction unfolds.

 

The Iran/Isreal conflict remains in the shooting stage, with both countries rapidly depleting their store of missiles and air defenses. It seems the TACO (Trump always chickens out) trade can also be applied to warfare. Markets fell as President Trump talked tough, threatening Iran with bunker-busting bombs unless the country surrendered unconditionally.

 

Two days later, on Thursday, while the markets were closed, he announced that he was giving peace a chance. He said he would take two weeks to decide on his next course of action. That gives Iran time to find a diplomatic off-ramp to appease the U.S. on its demand to end its nuclear weapons program. Israel, on the other hand, is moving forward with its attacks on Iran's nuclear facilities despite Trump's decision.

 

The oil and gas markets are fluctuating by several percentage points per day. The dollar has also been climbing, while the traditional go-to safe-haven trade of gold is not working at all. Gold, throughout most of this conflict, has been falling while silver has skyrocketed. This is confounding traders, since the opposite is typically expected in times of geopolitical stress.

 

Cryptocurrencies are experiencing a similar decline to gold, which is no surprise. This underscores the argument that digital currencies are not a safe haven but rather speculative assets with a high correlation to equity markets.

 

The Federal Open Market Committee meeting this week, as predicted, decided to sit tight and see what develops. While some investors were miffed that the Fed did not cut interest rates (as President Trump had suggested), most investors were not surprised. Chairman Jerome Powell made it clear that he needed to see how the upcoming tariffs would impact the economy and inflation.

 

Readers are aware that I am in the stagflation camp. I anticipate inflation will rise throughout the end of the year, accompanied by a slowing economy. That puts the Fed in a box where they are damned if they do, damned if they don't.  Cutting interest rates would heighten inflation, but hiking rates would risk tipping the economy into recession. Sitting on their hands and watching how Trump's tariff and tax bill plays out is the only safe course available to them.

 

And speaking of tariffs,  where are all these deals we were promised? Only one has been inked, and that is with Great Britain, where the U.S. has a trade surplus!  How many times must we be assured they are coming in a week or two?

 

In an interesting progression, investors face a series of make-or-break events divided into roughly two-week increments between now and the middle of July. The decision on Iran will come first, followed by the passage (or not) of the Big Beautiful Bill on or around July 4. That may turn out to be the Big Ugly Bill, depending on who you are, but its passage would be a big boost to stocks for at least a day or two.  And then, we have the implementation of reciprocal tariffs (or not) on July 9th. The market expects that TACO man will kick the can down the road for the second or third time. I am losing count.

 

So, where does that leave the markets? As I said, expect a chop fest. Last week, I narrowed my upside range for the markets based on the outbreak of war in the Middle East. Since then, the S&P 500 Index has gone nowhere. Next week, barring a cease-fire and peace between the two combatants, markets will continue to gyrate based on the latest headlines.

 

That leaves the market's range bound and probably short circuits my hope that we could reach 6,100-6,250 on the S&P 500 anytime soon. Now, don't take that as gospel because events could turn on a dime, propelling stocks higher. I just think that the probability of reaching my former targets has lessened. In July, however, I do expect we will be cruising for a bruising that could pull that average down by 400 points or so. 

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at [email protected].

Stretched, overbought, extended - use whatever word you want, but the market needed a pullback, and Israel provided one.  The markets, displaying remarkable resilience, climbed a wall of worry only to find geopolitical risk at the top.

 

On Thursday night, Israel's bombing of Iranian nuclear facilities precipitated the heftiest decline in weeks. Be assured not everything declined. Oil soared 8 percent. Safe haven bids spiked higher. Gold closed in on record highs, and the dollar rebounded from multi-year lows. 

 

Throughout the week, the markets were beset by negatives, with that wall of worry stretching higher and higher. The markets simply shrugged off the negatives while inching higher. Riots in LA couldn't phase the markets. Stocks, despite two days of tension over the outcome of the China-U.S. talks in London, remained firm. Fears around a mid-week U.S. 10- and 30-year bond auctions were taken in stride by investors. Not even the results of the latest inflation data could deter investors from buying stocks

 

And while that wall of worry stretched higher and higher, most of those bricks turned out to have a somewhat happy ending. The protests are still ongoing and have spread to various cities, but demonstrations over the administration's immigration policies have been peaceful for the most part. The China talks ended with both parties announcing a 'framework' for further discussions. That was better than both sides storming out of the talks, but progress toward a real trade agreement remained elusive.

 

This week's Consumer Price and Producer Price Indexes showed no real evidence of tariffs having affected the data. The numbers came in line with my predictions for CPI; month over month, excluding food and energy, rose a measly 0.1 percent.  On an annual basis, CPI rose 2.4 percent, even lower than my 2.5 percent projection for May. The Producer Price Index had a similar result.

 

The last ten-year and thirty-year U.S. Treasury bond auctions went badly, and markets sold off as a result. I suspect that Secretary Scott Bessent did not want a repeat of that circumstance and took steps to ensure a better auction this time. It's called "financial repression," a term used to describe the heavy-handed intervention of the government. Behind the scenes, I am sure the government prodded banks and bond dealers to bid for bonds even when they may not have wanted to. It happens far more often than you might expect. 

 

On the tariff front, the TACO (Trump Always Chickens Out) effect suggests that the reciprocal tariffs scheduled to take effect in a few weeks will be postponed again. Secretary Bessent has already said as much in his testimony before the House Ways and Means Committee this week.

 

The Federal Open Market Committee will meet next Tuesday and Wednesday. I do not expect the members to change their wait-and-see policy despite the president's almost weekly social media posts urging  Chairman Powell to do more. His latest outburst was a social media post demanding the Fed to cut interest rates by 1 percent.

 

I may have to lower my short-term target on the markets depending on the duration and severity of the present turmoil between Israel and Iran. Usually, geopolitical events like this roil the markets for a day or three before returning to normal. However, the Israelis say they are planning a two-week operation to destroy Iran's nuclear capability. If so, that could mean a widening of the conflict and create more volatility in the financial markets.

 

I expected the S&P 500 to hit 6,100 to 6,150 over the next two weeks before a downturn into July. That two-week timetable has just been upended. Technically, markets could still rise, but the probability of the last leg of this move upward has now been substantially lower.  As I wrote last week, "It is a tricky bugger to forecast," and Isreal just made it more so.

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at [email protected].

Stocks should climb a bit higher this month. The next round of tariffs is not due to be levied until July nor will Trump's Big Beautiful Bill (BBB) be passed until then. That gives investors some breathing room to book some gains.

 

The first-quarter earnings season is just about over. Overall results have beat estimates by 6 percent with 79 percent of companies delivering an upside earnings surprise. The incoming economic data has been mostly favorable but much of the data reflects an economy that has been rushing to purchase what it can before the onset of further tariffs.

 

A key economic indicator, The Institute for Supply Management (ISM), data for May showed a slowdown in business new orders and services and an increase in prices and employment. That is in keeping with my own forecast of an ongoing mild case of economic stagflation.

 

The employment numbers for May — a gain of 139,000 jobs — indicated that the labor market remained largely resilient amid the government's new tariff policy. I am forecasting a slowdown in the economy but am still expecting a 1.8 percent gain in GDP for the second quarter, followed by a 1.36 percent gain in the fourth quarter — slow but no recession. Those data points are a bit higher than most economists are expecting. On the inflation front, I see the Consumer Price Index for April announced to show a 2.36 percent increase year-over-year. Regular readers know I am predicting that the data will begin to show an uptick in the inflation rate that will continue into year's end.

 

That is one reason why I doubt the Federal Reserve Bank will bow to the president's wishes to cut interest rates anytime soon. The bond market has penciled in two rate cuts before years' end, but it is hard to see that happening with rising inflation. One caveat would be that if the tariff war drove the economy into recession, while employment fell off a cliff, the Fed might be forced to cut.

 

In the meantime, after months of promising trade agreements were just around the corner, Wall Street is in a "show me" frame of mind. The most progress on trade this week was a brief phone call between the president and his Chinese counterpart and a meeting with the newly elected German leader, Friedrich Merz. Investors are convinced that the TACO (Trump Always Chickens Out) tariff play is alive and well within the White House.

 

The administration has until June 9 to justify its sweeping tariffs under the Emergency Powers Act before the U.S. Court of Appeals. If unsuccessful, the Court of International Trades' decision a week ago to block those tariffs will stand. If so, legal experts predict the case will go to the Supreme Court immediately. In the meantime, our trading partners will most certainly drag their feet in tariff negotiations.

 

And while investors are no longer "tariffed," the spending side of the BBB is before the Senate. It has been crucified by the president's best bro and megabucks campaign backer, Elon Musk of Tesla. Musk has blasted the BBB as a "disgusting abomination" and demanded Congress "Kill the Bill."

 

 The forever friendship of the two amigos seems to have hit the rocks, if their vitriolic exchanges on social media this week are any indication. Will they kiss and make up? Let's hope so. Musk, through his ownership of X, has a large and powerful social media presence that could pose a serious threat to the bill's passage. Given their slim majority in both the House and Senate, the Republicans face the uncomfortable prospect of renegotiating the spending portion of this bill.

 

As for the markets, I wrote that the S&P 500 Index is in a trading range. My upside target is 6,100-6,150 or 100 to 150 points from here. This should happen in fits and starts working its way higher into July. At that point, traders will begin to discount the ramifications of possible tariffs and the passage of the tax and spending bill on inflation, growth, debt and the deficit.

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at [email protected].