It pretty much seems like we’re entering the penultimate phase—perhaps even the grand finale—on tariffs. While there’s some chatter that the deadline itself may be extended to August 1st, it appears that a lot could unfold in the next couple of days.
Stephen Innes: Yes, looking at the way the markets have been trading over the past fortnight or so, it seems to me that most participants are leaning into a derivative of the “taco trade”—that is, the belief that Trump always chickens out. So that’s the reflex we’re seeing in the markets right now.
Sure, there’s still some speculation that tariffs could end up being slightly higher, but what we’re witnessing is a general acceptance that we’ll likely settle into a softer tariff regime—something in the range of a 10% to 14% effective rate in the US, which by most accounts is quite manageable.
Of course, we’re still trying to assess how that will pass through into two key areas for equities: inflation and the Federal Reserve’s policy response. A lower tariff might resemble a VAT-style tax structure, which wouldn’t lead to a sustained inflation spike, but rather a one-off inflationary impact.
We’re also watching how it affects corporate margins—who’s actually absorbing the cost of these tariffs? Traditionally, we’d expect companies to pass most of it on, but that hasn’t translated into inflation so far with the current tariffs. So, it appears either corporates are absorbing some of the costs, or exporters are. We’re not yet sure how this dynamic will influence Fed policy. It’s entirely possible that we’ll see a dovish stance from the Fed, which could further fuel the market rally—but again, it all hinges on where tariffs ultimately land.
If you had to identify one asset class with the potential to outperform in the second half of the year—would it be equities, Bitcoin, gold, or something else?
Stephen Innes: I like gold. I’m more of a traditional gold buyer, and I’ve got some Asian influence after spending two decades here. The setup looks quite supportive going forward. Central banks are definitely buying—driven by de-dollarisation and shifts in reserve structures. Gold remains under-owned among Asian central banks, who are now trying to catch up with their Western counterparts. There’s still a long way to go in that catch-up play.Beyond de-dollarisation, we’re also seeing an East-West divergence in behavior. A lot of retail traders in the US are selling their gold positions now because they don’t believe the tariffs will be that aggressive—so that element of risk is being priced out. But in Asia, the buying remains very strong, especially in China and India. This will likely help support the physical market, even if North American retail interest softens.So, while there may be short-term fluctuations, ultimately, I believe gold will take the baton and run significantly higher over the next year or two.
