TWEEDLE TIMES—Stocks are poised to rally this month under a new August extension for blanket tariffs.
The Volatility Index (VIX) remained mute yesterday at 17 as the market largely looked past ongoing tariff chatter from the White House—a positive sign for investors since April’s Liberation Day VIX spike of +60.
The S&P 500 hovered at near all-time highs.
Whether the rally continues will depend on the uptrend broadening to the Russell 2000 and small caps. But with inflation relatively low and the 10-year yield below 4.5%, odds of a small-cap breakout are high.
Long-term threats of a coming recession still lurk as the dollar continues to weaken in anticipation of U.S. stimulus. Economists fear a weak dollar could spark runaway stagflation.
In June, the U.S. dollar tumbled 10.7%, which was the worst first-half return for the currency in 52 years.
President Trump also threatened [BRICS nations](https://en.wikipedia.org/wiki/BRICS)—Brazil, Russia, India, China, South Africa—with retaliatory tariffs as many fear these countries will create a new currency to avoid Western sanctions and rival the U.S. dollar, which remains the world’s reserve currency.
Egypt, Ethiopia, Iran, Indonesia and the United Arab Emirates joined the [BRICS](https://en.wikipedia.org/wiki/BRICS) in 2024.
Experts fear de-dollarization and the creation of the BRICS is the opening act of WWIII.
Who knows?
As for now, all is quiet on the Western front. July is historically a great month for stocks!
