Fed remains careful, but the tariff effect can worry: Peter Cardillo

Now, of course, the big head is the tar liefadline that ends today. What is your feeling – do you think there can still be an expansion? Although President Trump has stated that there will be no extension, do you believe that there is still a chance? And if not, how fleeting do you think that the coming weeks can be for global markets?
Peter Cardillo: Well, President Trump has said that there will be no extension, but he signed an executive order yesterday, which imposed an additional increase of 10% in some countries, which will take effect on 7 August. The original increase of 25% to 30% on most rates is taken into operation today. So the question is whether he will change his mind in the coming days. But it seems that he is determined not to do that.

Now, whether this is just difficult to talk and rhetoric, or whether it will come true in real action – we will just have to wait. But the markets are starting to show signs of Tariefjitters. We recently had a good run in shares, largely due to a strong profit season. Many large companies have reported solid income and in many cases have offered a fairly optimistic prospect. That is the backbone of the current rally.

But can we now touch a brick wall, especially because income does not seem to be a problem? The answer is yes, we can. In fact, we saw a late sale last night, largely because of the reorientation on the market on trade tensions and their future implications.

Pick up from what you just said – the American markets have been on record highs, especially the S&P and Nasdaq, which gather on the back of the Stellar income, especially of the beautiful seven. But as you said, we have now seen falls in the American markets, probably because the market started the prize in trade -related negatives. Was this kind of correction not expected, given the steep rates that Trump has imposed? Certainly, there will be an inflatory impact on the road. Would you say that that is not yet completely priced and that it will soon appear in inflation numbers?
Peter Cardillo: Yes, absolutely. If you look at the data from yesterday, the PCE even came slightly higher than both the market and our own expectations. That is an early indication of tariff -controlled inflation that crawls into the system. For example, rates for certain Canadian products are increased from 25% to 35%. These are items excluded from the trade agreement of the US-Mexico-Canada from the first term of Trump, and those increases will reflect in the inflation numbers.

This brings us back to the cautious attitude of the Fed. As you know, they did not reduce the recently, and that remains a bottleneck for the markets. Entering a new month – usually a slow period for shares – there is a strong chance that, unless there is a change in the rate policy, we can make a rough ride.