Trump’s UK trade deal ignites market rally, rattles Goldman, and sets off global dominoes

• US/UK Make a Deal! Stocks rally!
• India wants to be next.
• Bonds, Gold down, Energy and Bitcoin UP.
• Scotty goes to Switzerland to meet the Chinese.
• CPI due out at 8:30.
• Try the Flank Steak.

“Trump Unveils Framework for a Trade Deal with the UK” - wsj.

And BOOM – just like that - Trump makes a historic trade deal and with that much of that investor ‘angst’ goes ‘POOF’! Stocks rallied nicely, Bonds fell hard, Oil rallied nicely, Gold fell hard and Bitcoin surges up and thru $103K adding 5.9% or $5.700 The naysayers were ‘mum’ while the supporters celebrated the ‘outline’ of deal that rolls back tariffs on British steel and autos in exchange for the UK to purchase jets from Boeing as well as giving US farmers greater access across the British Kingdom.

And our friends at Goldman are now completely confused! They changed their stance on calling a recession in 2025, they change their stance on owning stocks, they change their stance on economic growth all tied specifically in response to evolving U.S. trade policy.

On March 31, 2025, Goldman Sachs raised the probability of a U.S. recession within 12 months to 35% from 20%, citing President Trump’s escalating trade war and planned tariffs. They slashed their 2025 GDP growth forecast to 1% and increased inflation estimates due to expected tariff impacts.

By April 7, 2025, Goldman further increased the recession probability to 45% from 35%, driven by tighter financial conditions, foreign consumer boycotts, and policy uncertainty from Trump’s tariffs. They cut their 2025 GDP growth forecast to 1.3% and projected three Federal Reserve rate cuts starting in June.

On April 9, 2025, just before a key policy shift, Goldman briefly raised their recession probability to 65% and forecasted a GDP decline of 1%.

On that very same day – April 9^th.

they changed their minds…. shortly after President Trump announced a 90-day pause on most tariffs (except for China, which faced 125% tariffs), Goldman Sachs rescinded their recession forecast. They reverted to a non-recession baseline BUT are still giving it a 45% chance of happening and a GDP growth forecast of 0.5% for 2025.

On May 3, 2025, Goldman recommended a defensive portfolio, favoring bonds and cash over stocks, reflecting concerns about U.S. economic exceptionalism and tariff impacts. (buy bonds / sell stocks) and then yesterday – they were out there buying up stocks like there was not tomorrow.

The rapid shift (I call it a ‘flip-flop’) in Goldman’s stance reflects the uncertainty and volatility surrounding Trump’s tariff policies. I’d say the rapid shift allows them to call their customers (all institutional) one day and say sell – generating all kinds of commissions and then change their minds to say buy, creating all kinds of trading commissions again. … So, you’re in/out, then out/in – generating all kinds of angst for yourself and all kinds of trading commissions for them…this vs. riding out the storm. Now while the storm is uncomfortable, if you have high quality names you have nothing to worry about. Call me to discuss! I’d love to hear from you.

Everyone was celebrating – or at least the longs were celebrating. If you found yourself ‘short’ coming into yesterday, you were NOT happy and you were not celebrating.

At the end of the day – the Dow added 254 pts or 0.6%, the S&P up 32 pts or 0.6%, the Nasdaq ahead by 190 pts or 1.1%, the Russell up 36 pts or 1.8%, the Transports added 350 pts or 2.5%, the Equal Weight S&P up 58 pts or 0.9% while the Mag 7 surged, adding 295 pts or 1.3%.

So, to put it in perspective for the retail investor - a $500k portfolio that is well balanced and invested in all equities – should have made you about $5000 yesterday and if you were a bit overweight Consumer Discretionary, Energy or Industrial then maybe $5500 or $6k. And yes, I understand that you are probably still underwater from ‘Liberation Day’ - we all are. But you have taken back most of what you were down…. not saying lost, because you only lose it if you SELL.

And who saw the most interest? Well if you look at the 11 major sectors – you saw strength in Consumer Discretionary + 1.2%, Energy + 1.4%, Basic Materials + 1.3%, and Industrials + 1.4%. Of those 4 – Discretionary, Energy and Basic Materials have been under pressure (negatived) all year, and so, when the tide turns – where do you look for opportunity? Exactly! In good names in oversold sectors.

There were though 3 losing sectors – Utilities – 0.8% but up on the year, Consumer Staples – 0.1%, but up on the year and Healthcare – 0.9%, leaving it down 2.5% on the year.

We also saw strength in Home Builders + 1.7% (but down 7.4% ytd), Retailers + 1.5% (but that is still down 10.5% ytd) Disruptive tech +3.8% (but down 9.3% ytd), Semi’s up 1% (but down 11% ytd), Oil Exploration and Production + 3.3% (but down 11.6% ytd) – are you seeing a pattern? Right – we saw buyers go shopping in the sectors that have been the worst performers ytd… As you might expect – on a day like yesterday, the contra trades ‘UNDERPERFORMED’. The VIXY lost 4%, the DOG – 0.7%, PSQ – 1% and SH 0.7% and the triple levered short – SPXS – down 2%!.

Now under this deal – most products will be subject to the 10% ‘basic’ tariff – but Trump has proposed making steel and autos exempt from the 25% tariff. In addition – they agreed that Rolls Royce Jet Engines be allowed to deliver their jet engines into America ‘tariff free’ – meaning absolutely NO tariffs on Rolls Royce jet engines – but Rolls Royce cars will still be subject to the basic tariff.

Here’s why these ‘engine’ exemptions are important.

Strategic Aerospace Supply Chain: exempting Rolls-Royce engines from the 10% baseline tariff on UK imports maximizes the competitiveness and secures the supply chain for US aerospace manufacturers, particularly Boeing and Lockheed Martin, which rely on Rolls-Royce engines for aircraft like the Boeing 787. This ensures preferential access to high-quality UK aerospace components critical for US defense and commercial aviation. Rolls-Royce engines power key defense programs, such as the US-built F-35. Maintaining tariff-free access supports US-UK defense collaboration, avoiding disruptions to joint military projects.

Now, all of this aligns with Trump’s “give something, get something” trade approach.

And what did we get for that? Well, the UK is cutting the 20% beef import tariff to zero and they are cutting ethanol tariffs as well. Now to be fair – they are still negotiating, the deal has yet to be signed – but it will be signed. Now UK Prime Minister Starmer was on the phone when this was announced and added that.

‘This is going to boost trade between and across our countries’!

Commerce Secretary Howie Lutnick added that this agreement will add $5 billion of opportunity for American exporters.

This morning, we are hearing that India is now ‘chomping at the bit’ – ready to make a deal! My question is who’s after them? And US futures are UP. Dow futures are up 20 pts, S&P’s up 13 pts, Nasdaq up 65 pts while the Russell is down 2 pts.

Eco data today is all about the latest inflation read…. the April CPI is due out…. and the m/m numbers for both the top line and Core are expected to be UP, while the y/y numbers for both top and Core are expected to be unchanged….and the clock ticks.

And like we discussed – when the mood changes for the positive (calm returns) then the spike in Gold will subside and yesterday – that is just what it did! Down $81 at $3310/oz. Now today, gold is up…. $22 as investors try to manage the odds of ‘signing the deal or not signing the deal’! A signed deal will be a positive for the markets but a negative for gold…So, it’s all good that they disclosed a trade deal, but it ‘ain’t over til the fat lady sings’ – meaning until the signatures are on the agreement – there really isn’t an agreement.

European markets are all higher today…. Italy and France are in a tight race – both up 0.7%, while Spain is in last place + 0.4%.

Now, we have the China conversation this weekend in Switzerland – and while hopes are high, this has to play out. In fact, I would say do not expect a deal, this meeting is all about trying to get both sides together, a kind of ‘kiss and make up’ meeting. And there are dozens of other trade deals that need to be addressed, and the reconciliation bill that is floating around the halls of congress also needs to get passed otherwise we are all going to see higher (significantly) taxes.

This morning – we are hearing more chatter about raising the upper tax bracket – so that anyone making more than $2 mi/yr.. will see a bit more in taxes. Last time I checked - $ 2mil/yr is a 1% er…. not a middle income or lower income earner… My sense is that the members of that group would support slightly higher taxes – because of the new opportunities that Trumps policies will create.

Ok, but here is where the rubber meets the road – he campaigned on NO NEW TAXES (just like Georgey Bush) and we know what happened to him…Now, this may not make a difference to Donny. Because he can’t run again….so he can’t be voted out…But he can change the landscape, allowing for more growth in the US economy.

Now to be fair – Trump did push back against this last week – saying it wasn’t going to happen, but then reality sets in….and you realize that he has to get some money from somewhere. So, let’s see how this goes down…what will the Dems do? Wil they vote for a bill that raises taxed on the ‘rich’, not the middle or lower class. I mean they campaigned on RAISING taxes across the board, so what do you say now? Are they going to support this?

The S&P closed at 5,663 up 33 pts…trading up to 5,720, before pulling back trading up and thru the most recent high of 5700 but we failed to stay there. We closed below that level and while we might try to challenge that again, my sense is that there is plenty of resistance between 5700 and 5750 (trendline).

One deal does not make a trend…. We look forward to more deals and the passage of the bill. So, while yesterday’s news is good, it will help build the foundation that we need to repair the damage – let’s not overreact. For now, we remain in the 5561/5750 trading range. The bias is to the upside, but we know how that can change on a dime.

So, sit tight. NO need to chase anything.

Pan seared flank steak with red wine shallot sauce

This is easy to make and will present like you spent hours preparing. For this you need:

A Flank Steak, butter, garlic, s&p, Red Wine, Shallots, Balsamic Vinegar (a good thick one) and olive oil.

Begin by melting a stick of butter – now season the steak with s&p, add chopped garlic and massage. Now pour the melted butter and massage that into the meat as well. Cover and set aside.

In a small pan – melt more butter (1/2 stick) with some olive oil – so that the butter does not burn. Now toss in sliced shallots – maybe like 4 shallots in total – sauté for 5 mins or so. Now add in ¾ cup of red wine (your choice) and 2 tblsp of the nice thick balsamic vinegar. Bring to a boil and then turn to simmer. Reduce by half – will only take a couple of min. Turn off the heat and whisk in one more tblsp of butter. (I can never have enough butter).

Preheat the oven to 400 degrees.

In a large oven proof skillet – add a touch of olive oil and heat up. When ready – add the flank steak to the pan and sear on both sides – 3 – 4 mins per side. Now place it in the oven for 5 – 8 mins (depending on thickness). Remove and cover – let rest for another 5 mins.

Prepare you to serve platter with fresh kale – When ready – slice the flank steak across the grain and arrange on the platter with the kale. It looks good, doesn’t it? Now you can spoon the red wine shallot sauce over it all or you can keep it on the side and let your guests serve themselves. Serve this dish with smashed roasted potatoes and a lg mixed salad.