by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment will begin by analyzing how a potential US government stake in Intel could signify a shift in economic models. We’ll then examine other critical market developments, including China’s economic slowdown, India’s push for stimulus, and the Democratic Party’s potential rebrand. We will conclude with an overview of other global and domestic factors shaping the financial landscape.

Intel State-Owned: The Trump administration is reportedly exploring a stake purchase in a struggling chipmaker — a move that comes after the president previously pressured the company’s CEO to resign over alleged ties to China. The potential investment would deliver a much-needed cash infusion as the company races to construct a new US-based semiconductor plant. This signals a notable shift in US economic policy, marking a departure from the traditional hands-off approach to private industry.

• The potential US investment reflects the government’s growing willingness to influence corporate operations, as evidenced earlier this year when the Trump administration secured a “golden share” in the Nippon-US Steel merger. That deal granted Washington veto power over key decisions, including worker layoffs, and signaled a more interventionist approach to domestic industry.
• US government investment in equities could bolster share prices, particularly in strategic industries. However, such intervention may also constrain corporate decision-making and potentially limit value-creating moves that are politically unpopular. As a result, investors are likely to scrutinize these companies more closely, ensuring they maintain operational efficiency despite political constraints.
• That said, we believe companies closely aligned with the government’s agenda could benefit from protective measures aimed at shielding them from foreign competition. Such policies may also help ensure these firms remain viable in the long run, offering domestic businesses a potential competitive advantage over time.

China Slowdown: The world’s second-largest economy is experiencing a widespread slowdown, with the effects of the trade war becoming increasingly apparent. Retail sales, factory activity, and fixed-asset investment have all decelerated, while the real estate sector has continued to decline. Additionally, unemployment has risen, increasing from 5.0% to 5.2%.

• The country’s sharp slowdown in growth suggests that the economy’s early resilience was short-lived, largely due to a temporary surge from businesses trying to get ahead of new tariffs.
• While this economic weakness could prompt further policy stimulus, there are clear signs that the Chinese economy may be in more serious trouble, especially since Beijing has reportedly told firms to resist absorbing the cost of tariffs.

India Stimulus: In his Independence Day speech, Prime Minister Narendra Modi pledged additional economic stimulus measures to bolster India’s self-reliance and insulate the economy from the impact of global tariffs. Among the proposed steps is a reduction in sales taxes on goods and services. His announcement comes as India and the US continue trade negotiations, with lingering disagreements over American farm and dairy product imports.

Rare Earths: China continues to solidify its stranglehold on global rare earths production, currently controlling approximately 90% of the world’s supply. Authorities have recently warned domestic firms that excessive stockpiling may result in reduced allocations, signaling tighter central control over these strategic resources. The irreplaceable role of these minerals in tech manufacturing strengthens China’s market control, exposing AI-dependent firms to serious supply chain risks.

Japan: Japan’s economy expanded for a second consecutive quarter, reducing fears of a potential recession. In the second quarter, real GDP grew by 0.3%, following an upward revision of the prior quarter’s growth. This stronger-than-expected performance is likely to pave the way for the Bank of Japan (BOJ) to consider a rate hike. A move toward tighter Japanese monetary policy, combined with sustained economic growth, would likely put downward pressure on the US dollar by strengthening the Japanese yen.

PPI Surprise: In July, supplier prices surged beyond expectations, pointing to mounting input cost pressures. The Producer Price Index (PPI) jumped to 3.3% year-over-year, up sharply from 2.3% in the prior year and significantly exceeding the 2.5% consensus forecast. A similar trend emerged in the core PPI, which climbed from 2.6% to 3.7%. The acceleration was largely fueled by trade services; excluding this category, the increase was more moderate, rising from 2.5% to 2.8%.

• Trade services are a measurement of the margins between wholesalers and retailers. They represent the change in the difference between the price that wholesalers and retailers pay for a good and the price at which they sell that same good. When this component increases, it’s a signal that wholesalers and retailers are either passing on higher input costs to their customers or widening their profit margins.
• Earlier this year, we singled out trade services as being an important indicator for understanding the “pass-through” effect of tariffs on consumers. During the pandemic, as trade services began to pick up, there was a corresponding and notable increase in consumer prices. We interpret this as firms using that period to exert their pricing power and protect profit margins in the face of rising costs.
• The biggest unknown now is whether this is a one-time event or a symptom of a longer-term problem. If trade services continue to increase, we would be very concerned that inflationary pressures could start to build, especially if households continue to show the ability to absorb them.
• That said, these surprising readings in both the PPI and employment payrolls are why we believe this is a time for prudent risk-taking as we work to understand the full impact of tariffs on the economy.

Democrat Abundance: As the party prepares for mid-term elections, a new push for deregulation is emerging as part of a broader redefinition of its platform. This shift in sentiment is partly influenced by Ezra Klein’s book, Abundance, which argues that overregulation has hindered urban progress. While not universally embraced, the book’s growing influence suggests a change in thinking, with an increasing number of policymakers advocating for less red tape. This pivot could benefit companies seeking to expand and take advantage of government programs.

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by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment will begin by exploring how a potential Fed leadership shakeup could influence monetary policy. From there, we turn to other critical market developments, including the implications of the Trump-Putin talks, Poland’s investor-friendly reforms to spur domestic equity demand, and fresh signs of AI’s accelerating momentum. We wrap up with an overview of additional global and domestic factors shaping the financial landscape.

 The New FOMC: President Trump has indicated that he is nearing a decision on nominating a new Federal Reserve chair to succeed Jerome Powell, whose term expires in May — or potentially sooner. Among the leading candidates under consideration are Kevin Hassett (chair of the Council of Economic Advisers), former Fed Governor Kevin Warsh, and current Fed Governor Christopher Waller. Other potential contenders may include FOMC members Michelle Bowman and Philip Jefferson.

• The president’s upcoming selection for Federal Reserve chair will mark his second appointment to the FOMC. His recent nomination of Stephen Miran to replace Adriana Kugler on the Federal Reserve Board represents his first FOMC selection this term. During his previous administration, he appointed Michelle Bowman and Christopher Waller to the committee.
• If elected, President Trump’s Fed chair nominee would fill one of four vacant governor seats on the seven-member board, giving his appointees voting control over monetary policy. This shift could significantly influence the central bank’s decision making and potentially reshape its policy approach.
• A potential theme emerging from this shift is a return to a more accommodative monetary policy. Treasury Secretary Scott Bessent has mentioned that the Fed should consider a 50-basis-point rate cut in September, with an additional 150 basis points of cuts expected by the end of the easing cycle.
• The potential for the Federal Reserve to adopt a more accommodating policy, with the possibility of rate cuts, would typically be a positive signal for bond prices. However, a long-term rally — especially for bonds with longer maturities — may be hampered by investor uncertainty about future inflation.

 Trump-Putin Meeting: Trump has issued a warning to the Russian president, stating that Putin will face severe consequences if he does not agree to a ceasefire. These remarks follow the US president’s meeting with European leaders, where they discussed his upcoming one-on-one meeting with Putin. The discussion reportedly focused on ensuring that any potential agreement would be fair to all parties including Ukraine.

• Ahead of the meeting, reports indicate that Russian forces have been making tactical advances in eastern Ukraine. This battlefield momentum may be influencing Putin’s negotiating position, as some analysts believe he will use these gains to seek favorable terms for a peace agreement.
• However, Russia’s tactical advances on the battlefield have come at a significant cost to its economy. While the country’s GDP has grown, this expansion has been heavily reliant on military spending. The budget deficit has widened considerably, driven by increased defense outlays and a recent decline in oil and gas revenues. This has led some analysts to express concerns about a looming debt crisis.
• Although the White House has tempered expectations for the meeting, we remain cautiously optimistic that President Trump’s upcoming talks with President Putin in Alaska may establish a pathway toward a ceasefire. We believe that progress in the conflict would likely be supportive of European asset prices.

 Pharmaceutical Tariffs: The US could impose tariffs on pharmaceutical imports within weeks, according to Commerce Secretary Howard Lutnick. This follows a Section 232 investigation launched by the Trump administration, which cited national security risks due to reliance on foreign drug suppliers. While President Trump has floated rates as high as 250%, the plan may begin with lower initial tariffs and gradually escalate them over time.

 Polish Reforms: The Polish government is seeking to generate interest in its domestic equity markets to boost economic growth. A recent proposal, the Personal Investment Account (OKI), would introduce a new savings account that eliminates the 19% capital gains tax on investments up to 100,000 PLN ($27,350). The initiative aims to encourage a greater number of households to invest in the country’s equities.

 China Property Crisis: Beijing is considering a plan for central government-run firms to purchase unsold homes from property developers. This move is the latest attempt by China to support its struggling real estate market, which has been a major drag on the economy. The initiative underscores the ongoing challenges that China faces as it tries to rebalance its economy away from a reliance on debt-fueled property development.

 France Debt: Investors are growing concerned about France’s widening deficit, which has caused the interest rate on French bonds to rise. This has led to a narrowing of the spread between French and Italian bonds, as Italy has simultaneously improved its own debt outlook, making its bonds more attractive. We are closely watching these interest rates in Europe to understand how the region will adapt to the coming era of increased government debt.

 Wealthy Stay in UK: The UK’s crackdown on non-dom tax status hasn’t caused the mass departure of wealthy foreigners that many had feared. Early payroll numbers show that Chancellor Rachel Reeves’s budget plan didn’t scare away as many people as some stories suggested. This is good news for the UK as it tries to fix its budget.

 AI Demand: Foxconn, a Taiwanese equipment manufacturer, has forecast that its server business will generate more revenue than its smart electronics division in the third quarter. This projected shift underscores the resilience of the AI rally, as optimism around technology continues to outweigh trade concerns. This strong demand for AI-related hardware will likely lead to a further increase in tech stock valuations.

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by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment will begin by exploring the market’s optimism for a rate cut at the upcoming Fed meeting. We will then analyze other key stories shaping the market, including the intensifying AI competition between the US and China, diplomatic efforts to bring Iran to the negotiating table on its nuclear program, and the factors keeping crude prices low. We will conclude with an assessment of other major international and domestic developments influencing financial markets.

 September Rate Cut: The latest CPI report aligned with expectations, prompting investors to price in another rate cut at the Fed’s upcoming meeting. The data showed that overall inflation rose 2.7% year-over-year, while core inflation, which excludes volatile food and energy prices, climbed from 2.9% to 3.1%. The increase has largely eased concerns about tariff-driven inflation, giving the Fed more flexibility to shift focus from its price stability mandate and toward maximizing employment.

• The most notable takeaway from the CPI report was that services inflation was the primary driver of price increases in July. Airline fares increased by the most in three years, while medical care and recreational services also contributed to the uptick. Meanwhile, commodity prices, which are more sensitive to tariffs, moderated, largely due to declining gasoline prices.
• Even though the increase in core CPI isn’t ideal, the market seems to believe that Federal Reserve officials will view the impact of tariffs as transitory and instead focus on the labor market. The Fed appears to be split into three groups: some officials want to cut rates, others favor holding them steady, and a final group is still undecided.
• The upcoming payroll report will likely be a decisive factor in the Federal Reserve’s decision on whether to cut rates and by how much. A strong report will probably result in a minimal rate cut, or possibly none at all. Conversely, another weak report would likely prompt the Fed to implement a 50-basis-point cut, compensating for its earlier inaction.
• The market’s attention appears to be divided between monetary policy and trade policy. Investors are seeking clarity on trade deals while also hoping for lower interest rates to improve lending conditions. A rate cut would likely support equity and bond prices but would also put downward pressure on the US dollar.

 China’s AI Push: The country is rapidly expanding its AI capabilities in a bid to rival the US in the field. Recently, China’s open-source AI advancements have drawn significant attention from American tech firms, which have predominantly kept their models proprietary. US observers worry that broader access to these open-source models could accelerate their adoption, potentially establishing them as the global standard.

• These concerns follow the release of several AI models from Chinese companies this year, including DeepSeek’s R1 Model. Other notable releases making an impact in the field are Alibaba’s Qwen, as well as models from Moonshot, Z.ai, and MiniMax.
• Competition from China is a significant risk to the AI sector’s growth, and US companies, particularly those in the Magnificent 7, are facing scrutiny over their capital expenditures. There is some worry that long-term demand may not be sufficient to justify these large investments.
• The US’s reliance on foreign revenue remains a significant concern, particularly since China’s continued ascent could threaten American companies’ earnings. While US tech firms currently maintain some momentum, the stretched valuations of major players and mega cap tech stock’s overwhelming dominance in the S&P 500 suggest that exploring other sectors may also add some portfolio value.

 EU Borrowing: European leaders are debating the structure of joint debt issuance and how to mitigate fiscal spillover risks among member states. One proposed solution would link debt obligations to each country’s spending plans and would necessitate a repayment of borrowed funds if nations exceed their budget allocations. The framework also includes provisions for emergency crisis loans, which would require unanimous approval from all member states.

• A move toward fiscal union within the EU could increase borrowing capacity and lower the cost of borrowing for member states. This, in turn, may help boost asset prices across the region.
• While reforms are expected to face opposition from countries like the Netherlands and Germany, we anticipate that potential progress on EU reforms will be a key driver of sustained optimism for the region.

 Panama Canal: The Panama Canal Authority is preparing to launch a tender for the operation of ports on both the Atlantic and Pacific coasts. This move would allow the Authority to retain ownership of the ports while outsourcing their management to a third party. The decision to maintain control over both ports comes amid rising US-China tensions over the strategic waterway and follows US concerns about growing Chinese influence in the canal’s operations.

• A surge in regional trade, driven by recent US tariffs, has heightened the importance of the ports, particularly for the US, which aims to closely monitor trade flows.
• A potential takeover of the ports illustrates how nations may attempt to remain neutral while navigating the growing rivalry between the US and China.

 Iran Talks: Germany, the UK, and France have issued a joint statement warning they are prepared to reimpose sanctions on Iran unless it resumes nuclear negotiations with the US. The European powers have set an August deadline for Tehran to return to talks or face renewed sanctions. Iran has countered by threatening to withdraw from the nuclear agreement entirely if punitive measures are reinstated.

 Crude Price Weakness: A supply surge and weak demand are expected to pressure oil prices in the coming months. According to the IEA, global inventories are projected to increase by 2.96 million barrels per day, driven by rising production (led by Saudi Arabia) and an economic slowdown concentrated in Asia. However, the agency cautioned that the outlook remains uncertain, particularly if sanctions on Iran and Russia intensify.

 Trump-EU: President Trump is set to speak with European leaders ahead of his planned talks with Russian President Putin later this week. The discussions will focus on a potential land swap deal, which may require Ukraine to cede some territory to Russia in exchange for a peace agreement. Both sides aim to negotiate terms that ensure a fair and lasting resolution.

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by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment today opens with President Trump’s extension yesterday of the US-China trade truce, along with additional issues in the bilateral relationship. We next review several other international and US developments with the potential to affect the financial markets today, including another interest-rate cut by the Australian central bank and personnel topsy-turvy at the Food and Drug Administration that has had a big impact on US pharmaceutical stocks.

United States-China: President Trump yesterday signed an executive order extending the current US-China tariff truce for another 90 days until mid-November. With the extension, US tariffs on most Chinese goods will remain at 30% rather than jumping to 145%, and China will continue to allow unfettered exports of its rare-earth minerals (at least in theory). While the extension provides some stability for US-China trade relations, it also likely reflects tough sledding in the trade negotiations between the two countries. Nevertheless, Asian stock prices have soared today in response, with the Japanese and Australian indexes hitting record highs.

• Separately, just a day after reports that Trump struck a deal with chip giant Nvidia allowing the firm to sell its lower-technology H20 semiconductors to China in return for the US getting 15% of the associated revenues, the president said he will discuss a new deal allowing the company to sell more advanced chips to Chinese customers.
• Trump suggested the chips sold to China under the new deal wouldn’t use cutting-edge technology. However, they would be a step up from the H20 chips. That suggests the president may succumb to Chinese pressure for the more advanced chips despite the risk that they could be used for military purposes against the US, so long as Nvidia pays enough to the US Treasury.
• According to the reports, some US national security officials are considering resigning to protest the sale of such advanced technologies to the Chinese.
• At the same time, reports today say Beijing has asked China’s major tech companies to justify their orders of Nvidia’s chips rather than domestic alternatives. The request suggests Beijing is now focusing more on the fact that China’s reliance on chips from Nvidia makes it vulnerable to a US embargo. While the Chinese government may still pressure the US to allow shipments of the chips in the near term, it is probably working hard to reduce or end its use of them in the future.

Russia-Ukraine: Just days before President Trump meets with Russian President Putin in Alaska to try to end his war against Ukraine, reports say Russian forces have broken through Ukraine’s defense lines in its eastern region of Donetsk. The Russian breach is reportedly the most dangerous for the Ukrainians in the last year and may show that the Kremlin is desperately grabbing for territory to improve its position in the Trump-Putin talks on Friday.

Europe: New satellite data confirms that European rhetoric and budget moves to rearm are now leading to actual factory construction and expansion. The data shows European defense firms have broken ground on about 2.8 million square meters of new facilities since the start of 2024, more than three times their groundbreaking in 2020-2021. At the risk of beating a dead (cavalry) horse, we think the figures confirm our long-held view that Europe’s defense rebuilding will be at least a short-term spur for the region’s economy and further boost its defense stocks.

United Kingdom: Chancellor of the Exchequer Rachel Reeves has ordered officials to plan for a further overhaul of the UK’s planning rules to speed up critical infrastructure projects, including construction of a third runway at Heathrow Airport in London. The order comes even though a less ambitious deregulation law is already making its way through parliament. In our view, the initiative is consistent with “YIMBY” moves to ease construction obstacles in the US and other Western countries, all of which could be positive for housing and construction firms.

Australia: The Reserve Bank of Australia today cut its benchmark short-term interest rate by 25 basis points to 3.60%, for its third rate cut this year. To justify the new cut, the central bank cited a modest weakening in the labor market and further evidence that consumer price inflation in Australia is falling back toward the midpoint of its target range of 2.0% to 3.0%. The move appeared to give a further boost to Australian stocks today, while the Australian dollar weakened by a slight 0.1% to $0.6505.

US Economic Data: President Trump last night said he will nominate the Heritage Foundation’s chief economist, AJ Antoni, to head the Bureau of Labor Statistics. Antoni has been a long-time critic of the BLS’s data collection methods, so he is expected to push for updated and improved processes. Nevertheless, since his nomination comes shortly after Trump fired the previous BLS leader for publishing weak job creation numbers, there may be concerns that future BLS reports could be manipulated to make the data appear more favorable.

US Pharmaceutical Industry: The Food and Drug Administration over the weekend said it has reinstated Vinay Prasad as head of the agency’s division for vaccines and other medicines, just weeks after he left the agency in response to pressure from right-wing influencer Laura Loomer. Prasad’s unexpected return has raised the prospect of further policy turmoil at the FDA, driving stock prices sharply lower yesterday for major biotechnology firms.

US Gold Market: President Trump yesterday confirmed that he did not mean to impose tariffs on imported gold, despite administration announcements to that effect last week. Gold prices declined about 1.2% on the news, ending at about $3,400 per ounce.

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by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment today opens with a slew of items on China’s politics and economy. We next review several other international and US developments with the potential to affect the financial markets today, including a new Australia-India deal that aims to boost the latter’s rare-earths industry and an important statement by a Federal Reserve policymaker calling for aggressive interest-rate cuts through the end of the year.

Chinese Politics: Reports yesterday said Chinese authorities have detained Liu Jianchao, a senior Chinese diplomat widely seen as a potential future foreign minister. As of this writing, no further details have been made available. However, Liu could be just the latest in a long series of military, diplomatic, and industry officials who have been arrested by General Secretary Xi’s government on allegations of corruption. In at least some cases, the “corruption” may have involved ties to foreign intelligence services.

Chinese Price Inflation: In a report Saturday, the July consumer price index was unchanged from one year ago, a bit weaker than expectations that CPI inflation would remain at June’s rate of 0.1%. Even more concerning, the July producer price index was down 3.6% on the year, for the 34^th straight month of deflation in business-to-business prices. The figures reflect China’s worsening excess capacity and production coupled with weak consumer demand, which is weighing on prices, hurting corporate profits, and pushing firms to dump exports abroad.

Chinese Industrial Policy: CATL, the world’s largest maker of batteries for electric vehicles, said today that it will suspend operations at one of its key lithium mines in China. Against the backdrop of China’s massive excess capacity, cutthroat competition, and falling prices, CATL’s move is being taken as a sign that Beijing may be starting to take steps to rein in the country’s excess production. In response, Chinese lithium prices have risen modestly today, while share prices for global lithium miners have surged.

Australia-India: The South China Morning Post yesterday said Australia and India have launched a program to cooperatively ramp up their output of rare-earth minerals. Under the program, Australia’s relatively advanced rare-earth miners and processors will boost their investment in India so that country can better leverage its big reserves of the critical minerals. The program shows how officials around the world are reacting after belatedly realizing their vulnerability to China’s near monopoly on rare earths.

• Ever since China clamped down on its rare-earth exports to retaliate against the US’s new trade and technology policies, the US and other key governments have been working feverishly to develop their own mines and processing facilities.
• Those efforts are likely to create interesting investment opportunities in the rare-earth mining and processing space going forward.

United States-China: The Financial Times yesterday scooped that in return for the right to sell its H20 artificial-intelligence computer chips to China, semiconductor giant Nvidia agreed to pay 15% of the associated revenues to the US government. The report said AMD has also agreed to pay 15% of its AI-chip revenue in China to the US government. The payments, which are essentially an export tariff, suggest the administration could impose similar payments on other exporters in return for looking away from the national security implications of their sales.

United States-Brazil: The US administration is reportedly preparing further sanctions on Brazil for its persecution of the country’s former right-wing populist president, Jair Bolsonaro, who is under trial for conspiring to overthrow the democracy. Coming on top of the US’s punitive 50% tariff against Brazilian imports, the new sanctions will reportedly be focused on judges involved with the Bolsonaro trial. However, the US’s readiness to impose further penalties probably raises the risk of new sanctions on the broader economy as well.

US Monetary Policy: In a speech on Saturday, Fed board member Michelle Bowman said the recent downward revisions to US payroll counts suggest the central bank should be cutting interest rates. Indeed, Bowman said that she expects to support a rate cut at each of the Fed’s three remaining policy meetings this year. Despite President Trump’s anger at the revised payroll data, Bowman’s comments illustrate how signs of a weakening labor market support the president’s call for the Fed to cut rates more aggressively.

US Economy: The Financial Times carries an article today highlighting how smaller businesses in St. Louis have begun to sharply hike prices in response to the US’s new import tariffs. The article is consistent with other recent data showing that price inflation is picking up for goods more exposed to imports and that smaller firms are more apt to be hiking prices, probably because they have less market power and financial flexibility to absorb the higher tariff costs. What isn’t clear is how long those price hikes will continue and how much they’ll broaden.

Global Rice Market: Export prices for Thai 5% broken white rice, the global benchmark, have dropped to $372.50 per metric ton in recent days, reaching their lowest level since 2017. Prices are now down some 26% since late last year and 13% for 2025 to date, reflecting both bumper harvests and India’s recent move to start lifting export curbs. Coupled with today’s low prices for crude oil, wheat, and corn, the low rice prices could help keep a lid on consumer price inflation around the world, despite concerns about price hikes from the US’s new import tariffs.

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by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment begins with a discussion of President Trump’s pick for the vacant Fed governor seat. We will then turn to other key stories shaping the market, including our thoughts on the ongoing disagreement over the US-Japan trade agreement, OpenAI’s latest update, and why tariffs are impacting gold prices today. We will conclude by assessing other major international and domestic developments affecting financial markets.

FOMC Shake Up: President Trump has selected Stephen Miran as his pick to fill the vacant seat on the Federal Reserve Board of Governors. Miran currently serves as the head of the Council of Economic Advisers and is expected to help the president push for lower interest rates. While he still needs Senate confirmation, the chamber is currently controlled by Republicans, which likely improves his chances. Miran was previously confirmed for his current role by a vote of 53-46.

• This move could trigger another FOMC dissent if rates remain unchanged in September. Historically, a Fed Chair facing four dissents from governors is seen as losing confidence and often prompts a resignation. So far, two officials, Christopher Waller and Michelle Bowman, have broken ranks. If Miran joins them, it would mark a critical third vote, edging closer to that symbolic threshold.
• A more dovish Fed is likely to push for additional rate cuts, which should support bond prices in the near term. However, lower rates may also lead to a higher term premium, as investors could demand greater compensation due to rising inflation expectations and the growing supply of bonds from widening deficits. While we remain cautiously bullish on long-term bonds in the short run, the longer term outlook is uncertain, primarily due to fiscal concerns surrounding the deficit.
• That said, in a related development, Fed Governor Christopher Waller has emerged as a leading candidate to succeed Jerome Powell as chair of the Federal Reserve. If nominated, Waller would effectively serve as a “shadow Fed chair,” helping to signal the central bank’s policy direction to markets ahead of Powell’s eventual departure.

Tariff Adjustments: The White House will change its trade agreement to prevent the stacking of tariffs on Japanese imported goods, therefore stopping new tariffs from being added to existing ones. This decision comes at the insistence of Japan, as this provision was explicitly included in the European Union agreement but not in the one with Japan. Excessive tariffs are expected to be refunded.

• A significant amount of the confusion surrounding the agreement is due to the absence of a written document. However, this lack of a written agreement may suggest that trade negotiations could continue.
• Despite announced agreements, we anticipate more closed-door discussions on contentious issues such as each country’s investment pledges. These conversations will likely be kept quiet until negotiations are finalized to shield the market from any signs of uncertainty.
• Even so, this informal approach to trade talks doesn’t alter our outlook. We anticipate the president will prioritize market stability and avoid any trade policies that could disrupt the economy.

Gold Prices: The US has imposed tariffs on one-kilogram gold bar imports in a move that has contributed to a sharp rise in bullion prices. The tariffs are likely to negatively impact Swiss gold manufacturers, who play a significant role in melting gold for sale in the London and New York markets. Swiss Gold was initially assumed to be exempt from tariffs, similar to other commodities, including certain classifications of bullion. The move highlights the president’s push to establish more manufacturing in the US.

Open AI Upgrade: OpenAI has launched the newest version of its language model, GPT-5, in an effort to enhance its competitive standing. The model’s primary updates include a focus on improving its code-writing ability, a field where competitors like Anthropic have excelled. It also features new reasoning capabilities designed to reduce hallucinations — the generation of fabricated information. This release is expected to serve as a benchmark for the technology’s performance amid growing business interest.

Taiwan AI Exports: Despite a strong currency and a 20% US tariff rate, which is higher than many of its neighbors, Taiwan has surpassed its full-year trade surplus record in just seven months. This surge was largely driven by the export of AI-related goods, for which demand has been exceptionally high, and by customers rushing to place orders ahead of the tariff deadline. While the next few months may see a slowdown for Taiwanese goods, we still believe that exports related to AI will continue to grow, even in the face of trade uncertainty.

Gaza Takeover: Israeli Prime Minister Benjamin Netanyahu has announced plans for the country to take over Gaza City. The decision reportedly goes against the advice of his own military, but Netanyahu has stated that it is essential for driving Hamas out of power and providing security for Israel. His plan includes the return of hostages, the creation of a temporary Gaza administration, and the eventual handover of the region to Arab forces. The move is likely to lead to global criticism but unlikely to impact markets in the short-term.

Armenia-Azerbaijan: President Trump is scheduled to meet with the leaders of Armenia and Azerbaijan to mediate a peace agreement. The two former Soviet countries have a long history of conflict over territory, particularly the Nagorno-Karabakh enclave, which Azerbaijan fully recaptured in 2023. This decision to hold talks underscores the president’s preference for managing global tensions through diplomatic deals rather than military intervention.

Redistricting Fight: President Trump continues to play an active role as states prepare their electoral maps for the 2026 midterm elections. Notably, he is advocating for the exclusion of immigrants from census counts — a controversial position that would likely face immediate legal challenges. The redistricting debate has intensified as Texas advances proposals that could create five additional GOP-favorable congressional districts.

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