Normally we delve into NFP in some detail.

Today, I think it is safe to ignore it. As a whole, the report was better than I expected, which in a “steady state” economy, might mean something. The jobs data has little to do with DOGE or with tariffs (though some work may have been pulled forward as companies tried to beat the tariff deadlines).

Powell was quite balanced. Job risk versus inflation risk. Many were hoping for a Powell Put, but we aren’t getting one, at least not yet. In some ways tariffs are a “one-time” pop on goods, and aren’t typically viewed as “inflationary” but the one-time pop needs to be respected since we are already at such high price levels. The President, via social media, seemed to accuse Powell of being political, but I do think that he has to be cautious on inflation – especially when it is a direct result of policies from D.C. – some of which have not been implemented.

Which brings us to tariffs. China is coming back aggressively by introducing “retaliatory” tariffs. They were reciprocal – in the sense that they matched what the U.S. had imposed on them. However, they are unlike the U.S. tariffs, which are based on exports versus trade with a nation.

Vietnam is supposedly at the table. They got hit with 35% tariffs, while they impose somewhere between 5% and 10% on the U.S. (depending on how you calculate the average). Vietnam only imports about $10 billion, so it is pretty small in the grand scheme of things.

Potential Positives:

• After two big down days for stocks, and virtually anyone in finance or with experience in economics blasting the tariff approach – the administration could use some wins. Expect the administration to be working around the clock this weekend to announce some “wins.”
• The alternative would be to “redo” or “massage” the tariffs and make some changes to the administration (you can’t make changes in less than a week, without blaming someone). This too would be great for markets.
• Even chatter that someone could challenge the legality would probably be good – though that opens up some other cans of worms that might be worse than dealing with the current tariff policy.

Potential Negatives:

• More countries or regions join in the retaliatory tariffs.
• Countries start announcing new trade agreements that bypass the U.S.
• Some other negative surprise occurs across the globe over the weekend (far easier to imagine something bad happening, than something good).
• Even on a bounce, has so much damage been done to expectations and global relationships that we can’t hold any gains?
• At what point does retail (or even worse, 401k holders) start to give up hope and sell?

I’m far less bearish as we head into the weekend, as the positives seem as likely (or even slightly more likely) than the negatives.

Having said that, I doubt we’ve seen the lows in markets for this cycle, so be cautious on positions and be prepared to sell any longs and reload shorts quickly!

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