The S&P 500 just recently closed above its 20-day moving average for the 60th consecutive trading day, the longest streak since 1998. This is the fifth such instance in the last 50 years. In each of the four previous cases, the index was higher three months later, and a year out, it gained between 20% and 26%—never lower in the short term. Not a prediction, just data to help support the case that this bull market appears to have legs still.
As for trade, recent US goods trade deficit data may look superficially encouraging. June’s goods deficit shrank by -10.8% month-over-month, but the composition tells a different story. Imports fell 4.2% to the lowest level since March 2024, driven by a steep 12.4% drop in consumer goods. Exports declined as well, falling -0.6%. Lower imports signal weaker domestic demand. A decline in both imports and exports is not expansionary. It’s a warning, not a win.
That backdrop hasn’t stopped President Trump from reviving tariff policy. While the “reciprocal tariff” rate reset was pushed to August 1, his administration has already begun announcing deals with Japan, Indonesia, and the Philippines, among the first to accept new trade frameworks. Though these arrangements are publicized as diplomatic progress, they leave tariffs elevated above pre-2024 levels, with the economic burden falling squarely on US businesses and consumers.
This builds on the pattern evident since spring. As we wrote in March, tariffs are not about free trade—they are about leverage. They pick winners and losers. Automakers illustrate this well. Consider Japan: the base auto tariff is now 15%, lower than the threatened 25%, but still punitive, especially when US auto imports from Canada and Mexico are set to rise to 30% and 35%, respectively, next month. Detroit’s Big Three are already arguing that Japan’s lower rate puts them at a competitive disadvantage, even as some foreign automakers benefit.
Tariffs also create a constant churn of lobbying. One industry group wants them raised, another wants exemptions, and politicians use them to extract promises of foreign investment and purchases. But none of this changes the basic math. Tariffs distort incentives, misallocate resources, and introduce perpetual uncertainty. From Adam Smith to Friedrich Hayek and Milton Friedman, they were all clear: tariffs hurt the enacting country more than the target. That remains true.
Markets aren’t ignoring these issues. They’re discounting a path forward that looks better than the worst-case scenario. Stocks move on surprises, and much of what’s happening now was already priced in months ago. So, markets look at the current landscape and are moving according to reality versus perception. A 15% tariff in July feels less threatening after a 25% scare in April, helping markets move upward.
The bull market continues, albeit less robustly in the US than outside the States. Policy mistakes may create more problems, but so far, none have derailed the economy. As always, watch what markets and politicians do, not what they say.
