We started this week exactly where we left off last week. U.S. equities markets slipped the surly bonds of Earth and blasted into the stratosphere. 

Monday also saw Bitcoin topping $123,000 for the first time ever, driving crypto right up there alongside equities in the nethers of space.

By Tuesday morning, we found ourselves yet again at record-setting altitude, with the S&P 500 jumping to a previously unseen high in the minutes that followed opening bell. And a strong Nvidia earnings report pushed the tech-heavy Nasdaq to a new record by the close of trading that day.

But somewhere between Tuesday and Wednesday, the markets turned on investors.

By midweek, Bitcoin and all three major indices–the S&P 500, Dow, and Nasdaq–had plummeted back to earth.

According to federal data released on Tuesday morning by the Bureau of Labor Statistics, inflation accelerated to 2.7% on an annual basis in June, which is up 0.3% versus May. This marks the fastest monthly jump in inflation since January. 

U.S. equities markets have been resilient, if not invincible, in the face of Trump’s tariffs and the threat of tariffs to come. But analysts say the kryptonite may finally be working.

Even if the most dire of Trump’s tariff threats haven’t come to pass, the tariffs he has imposed are the highest that we’ve seen in a century. This week’s market behavior may be proof that we are only now beginning to feel the ramifications of this reality. 

Matthew Ryan, head of market strategy at global financial services firm Ebury suggests that “the latest U.S. inflation report practically confirmed that President Trump’s tariffs acted to push up consumer prices in June.” 

Ryan points to what he calls underlying inflationary pressure, and warns that this pressure will only grow more acute when the next round of tariffs goes into effect on August 1st. 

There’s another x-factor that has markets feeling jittery at the moment. While inflation is hardly out of control, we are well above the Fed’s precious target rate of 2%. And as long as we are headed in the opposite direction, the odds of an interest rate cut this year continue to go down. 

Fed Chair Jerome Powell has repeatedly warned of the inflationary pressures caused by tariffs. The likelihood is that these pressures already scuttled would-be interest rate cuts in the first half of 2025. At our current trajectory, the next two quarters may share this fate. 

But here’s the wrinkle. The president has been pretty clear that he doesn’t want to hear excuses. He wants rate cuts. 

Technically, the Federal Reserve operates with independence from the Executive branch. There is no legal precedent for the president to exercise authority over the Chair of the Federal Reserve. Dismissal of a Fed Chair generally requires a provable act of fraud. 

But President Trump has been increasingly clear about his discontent with Powell, calling the Fed Chair “terrible,” indicating that interacting with him was “like talking to a chair” (which it bears noting, he is), and dubbed him Mr. Too Late.

In spite of giving him a cool name, it’s clear Trump doesn’t want Powell to be a part of the Superfriends anymore. 

After emerging from a meeting with a group of House Republicans on Tuesday, the president said, "I talked to them about the concept of firing him. I said, 'What do you think?' Almost all of them said I should. But I'm more conservative than they are."

Of course, now that it’s out there, there’s probably only one way this goes…

Presumably, this will clear a path for the president to appoint somebody who is more receptive to his oversight.

Most analysts argue that this wouldn’t have the effect Trump hopes for. 

“Trump wants lower interest rates,” writes Greg Valliere, chief US policy strategist at AGF Investments. “He thinks ousting Powell will make a difference, but most market analysts think it would send a signal that the Fed has lost its independence.”

This signal could damage U.S. markets and economic stability in countless ways. To wit, as rumors swirled of Powell’s ouster, the value of the U.S. dollar sank and Treasury bond yields spiked.

Though Thursday saw a slight return to form, the trading week ultimately ended with a dull thud–the Dow finished .3% lower, the S&P 500 was flat, and the Nasdaq came off of its record high to secure only modest gains on the week.

Investors are clearly on edge over earnings, tariffs, and the state of the Fed. With so much instability clouding the close horizon, it’s hard to know whether the markets take off again or faceplant come Monday. 

Of course, we’ll keep you up to date on tariffs, the Fed, and the markets at large. Until then, another summer weekend is upon us, so go out and make the most of it!

CoreWeave (CRWV) shares jumped on Tuesday as the artificial intelligence cloud computing firm said it plans to invest more than $6 billion in a new data center in Lancaster, Pennsylvania, amid growing demand for AI infrastructure.

This sounds great, but plans change. And if you do the slightest of digging, this is at least partially brought to you by some of the same masterminds behind the some of the CDOs of the early 00s (and we all know how that went):

In August 2023, CoreWeave secured a $2.3 billion debt financing facility led by Magnetar Capital and Blackstone by using Nvidia's H100 GPUs as collateral.

(https://en.wikipedia.org/wiki/CoreWeave )

 In 2006–2007, Magnetar Capital "facilitated the creation of a few of the worst-performing collateralized debt obligations",  

 While the CDOs Magnetar Capital helped create led to losses on Wall Street, the company profited as a result of its hedged investment strategy;

and insert pikachu-face:

Despite investigations by the U.S. Securities and Exchange Commission into several deals in which Magnetar Capital invested, no enforcement action was taken against the firm

(https://en.wikipedia.org/wiki/Magnetar_Capital)

Makes for great headlines, but curious to see how this plays out. Maybe it'll be great, leading to job creation and an AI boom, or it could pump the stock, then fizzle out.

On July 4th, President Trump signed his $4.5 trillion tax bill into law. The spending bill provides massive tax benefits for the wealthiest 20% of Americans, makes permanent the corporate tax breaks initiated under the 2017 Tax Cuts and Jobs Act, and adds a whole bunch of new business tax write-offs for things like equipment, construction, and R&D. 

Wall Street took the news in stride.