The markets remain resilient despite fresh negative headlines about new tariffs. A “buy-the-dip” scenario was widely anticipated and triggered a daily bullish impulse in the S&P Indicator. However, the 6300-level distribution zone remains firmly intact, suggesting the current market phase is a sideways distribution rather than a true breakout.
In 2025, similar tariff-related headlines have often been reversed or softened later (the so-called TACO-Trade phenomenon). The latest tariff announcements appear increasingly lacking in credibility—for instance, a proposed 50% increase on copper and a 200% increase on pharmaceuticals. It defies rational logic how such measures could possibly benefit the US population. While these announcements sparked significant moves in copper futures, the reaction in the healthcare sector was barely noticeable. Markets seem increasingly inclined to discount or ignore such political noise.
Instead, what appears to genuinely drive market direction are reliable indicators of the US economy’s health and the Federal Reserve’s policy decisions. The key catalysts this week are expected to be:
Wednesday: FOMC meeting minutes – potentially offering insights into the strength of the US economy and possible interest rate cuts. Thursday: Initial Jobless Claims – which could signal either continued economic strength or hints of a looming recession.
In the short term, the outlook remains sideways as long as the 6300 level isn’t breached and held for at least two consecutive days. Seasonality also tends to be weaker during the second half of July, extending into mid-August.
A factor arguing against further gains, despite the market’s seemingly irrational strength: Corporate buybacks.
Based on JPM and Bloomberg data, at the beginning of 2025, most companies significantly reduced or completely suspended share repurchase programs due to weak business outlooks. However, something unexpected has happened: Given the heightened uncertainty, many US and international companies are holding back on future-oriented investments. Instead, they are redirecting their cash into stock buybacks—a major driver behind the recent market strength. This dynamic could continue for a while. But the key question is: What happens once clarity finally returns and companies need that cash for real investments? Or if business conditions deteriorate, demanding liquidity for operations instead of financial engineering? And of course, not to mention the negative effects to the long term economical outlook that an absence of investments in innovation and the future could bring.