Tariffs, tech and tailwinds: Trading the tightrope of a two-ticker tape week

The Asia open brings a modest sigh of relief—a market exhales after Tokyo’s weekend political fender-bender failed to spread carnage across the global bond complex. JGB futures held firm, and that alone was enough to trigger a minor positive flutter in US equity futures and a soft unwind of pre-event risk USDJPY long positions. Still, no one is bailing, likely waiting for London to run with the FX baton. Still, volatility remains bottled up, at least for now, giving traders the confidence to cautiously nibble back into positions.

But if last week was about digesting Japan’s expected political stumble and chasing growth momentum in the U.S., this week is about managing two ticking clocks: the August 1st tariff deadline and the start of Big Tech earnings. It’s a high-stakes cocktail—part policy roulette, part valuation validation.

Commerce Secretary Howard Lutnick’s Sunday remarks reaffirmed the White House's "hard stop" for new tariffs, while hinting at possible wiggle room beyond the deadline—that paradox—firm rhetoric laced with optionality-is classic Beltway brinkmanship. Markets, of course, aren’t blind to the game. But when you've got $2 trillion in tech market cap reporting this week, you can’t afford to fade the tape on policy ambiguity alone.

Alphabet and Tesla kick off the Mag 7 earnings bonanza on Wednesday, and they come bearing not just earnings risk, but the broader question: is the AI gold rush real, or are we simply inflating another Nasdaq hot air balloon? So far, the runway’s been smooth—86% of S&P 500 companies reporting have beaten expectations. But those expectations were sandbagged, and traders know it. Now comes the moment of truth, especially with valuations stretched like yoga mats at a Silicon Valley retreat.

There is, however, one underappreciated tailwind quietly lifting U.S. equities—FX. The dollar, battered and bruised by the sell “ US Exceptionism,” has now shed 7% YTD on a trade-weighted basis. Put it plainly: a 10% decline in the US dollar typically boosts S&P 500 EPS by 2–3%, all else being equal. That’s no rounding error. For multinationals, it’s a stealth stimulus.

And the winners? You know the list. The Magnificent Seven, Nasdaq 100 constituents, are all riding that FX gravy train. In short, the global bellwethers are getting paid in stronger currencies and reporting in weaker dollars. That’s not just a tailwind—it’s a turbocharger.

Meanwhile, Asia opens the week in a tentative crouch. China’s loan prime rates are due Monday, and consensus is leaning toward no change. The PBOC, encouraged by firmer Q2 GDP data and emboldened by a 90-day trade ceasefire, sees little reason to ease. That leaves regional traders dancing between optimism and caution—especially as the Hang Seng and CSI 300 cool off after their recent moonshot in growth names.

So here we are: a market balancing on a knife-edge of macro noise and micro earnings truth. The political wasabi has cleared—at least momentarily—and now it’s all about whether tech can deliver, whether Trump will blink, and whether the dollar’s decline can do just enough heavy lifting to keep the S&P's wheels turning.

No shortage of spice this week. Just don’t blink.

The trader view: Building a callus

The markets have officially built a callus. What once provoked a full-blown tantrum—a 12% S&P nosedive, a 30 bps Treasury tantrum, the dollar cracking, and oil getting tossed like a ragdoll—is now met with a shrug, a yawn, and a fresh high on the screen. Tariffs, Fed drama, threats, bluster, recycled trade fights—it’s all become background noise to an audience that’s grown more interested in bank earnings and semiconductor chips than in the geopolitical soap opera playing on the macro stage.

Think of it like a trader’s version of Pavlov’s dog—but reversed. Once conditioned to flinch at every tweet or tariff salvo, the market now barely twitches. You’d think that bringing Canada and Mexico into the tariff blender again would trigger flashbacks of April’s bloodbath. Instead? Crickets. Nvidia makes a new high, and the S&P waltzes to a record. Jay Powell’s job is allegedly hanging by a thread? Yields blink for a moment, then go back to watching Netflix.

What changed? Simply put, the data didn’t blink.

Despite all the doomsday shrieks, the real economy has continued to trudge forward like a diesel truck on a flat highway. Inflation? Not exactly galloping. Core goods prices are clocking in at a sedate 0.8% annual rate—barely enough to nudge the needle, let alone trigger a wage-price spiral. Even core CPI, the Fed’s preferred inflation compass, is ticking along at just 2.1%—the lowest clip in four years. All this with an 8% drop in the dollar to boot. If this is what tariff-driven inflation looks like, then the market is content to take another helping.

Growth? The doomsayers may need to revisit their models. GDP in Q1 did take a hit—courtesy of front-loaded exports—but Q2 is tracking near 2%. Retail sales in June appeared to indicate that the consumer was stretching before another lap: a +0.6% headline, a +0.5% control group, and a solid +4.5% year-over-year increase. Initial jobless claims have fallen five weeks in a row, now resting below their 52-week average. Manufacturing isn’t sprinting, but it’s holding pace. The data doesn’t scream expansion, but it doesn’t whisper recession either. It hums.

And so the Fed, which only a few months ago was being begged to cut rates with the desperation of a gambler down to his last chip, now finds itself in a more comfortable seat. The July meeting is no longer in play. September is the next live round, and even that’s more of a coin toss than it was a few weeks ago. Futures markets, ever the cautious bookies, are pricing in one cut every two meetings for the next year—steady, predictable, unspectacular. What are they not pricing in? A speed-up in cuts next spring when the winds of Washington almost certainly blow in the aura of the new Fed Chair. Traders may want to keep their powder dry on that bet.

In short, the market has gone from panic mode to poker face. It’s not that it loves tariffs or thinks Powell is safe—it’s just learned that bluster without bite is no reason to sell risk. Unless something truly breaks—be it inflation, growth, or geopolitical trust—the path of least resistance still leads higher. Just don’t expect anyone to cheer this time. They’re too busy watching the charts.