Why the near-record high market has taken Trump’s renewed tariff blitz in stride
The S & P 500 pulled back from record highs on Friday as investors dealt with this week’s renewal of tough tariff rhetoric from President Donald Trump. In a series of letters, the White House informed a slew of U.S. trading partners about the levies they would face if trade agreements were not reached by Aug. 1. On Saturday, Trump revealed 30% tariff levels on goods imported from the European Union and Mexico. Earlier this week, it was Canada, Japan, and Brazil. The letters were meant to reset U.S. expectations as the 90-day pause of the “reciprocal” tariffs came to an end on July 9. Despite the return of the daily barrage of trade headlines, the S & P 500 and the Nasdaq each closed at a record high Thursday. Then the news of 35% tariffs on Canadian imports came after the bell. Friday’s drop tipped stocks slightly negative for the week. While technically breaking the market’s three-week winning streak, the S & P 500 and the Nasdaq were still near their all-time highs. The market even crowned its first $4 trillion company, Club name Nvidia . Wall Street’s ability to take Trump’s renewed tariff campaign in stride, rather than panicking as it did in early April, comes down to investors becoming more comfortable and attuned to the president’s negotiation style. While we can’t ignore the rhetoric, it is as important as ever to maintain a cool head when headlines like these hit the tape. After all, if the lows and highs of the first half of this year reinforced any of Jim Cramer’s mantras, it’s that nobody ever made a dime panicking. Echoing that sentiment, Jim addressed the third annual meeting of the CNBC Investing Club on Friday from the New York Stock Exchange. He stressed the importance of separating personal views on politics from investment decisions. That’s not to say you have to like, or even be OK, with the rhetoric out of Washington, only that it’s key to manage your portfolio with less focus on the president’s table manners and more focus on what his policies mean for economic growth and, in turn, corporate earnings, which drive the market. Earnings season begins in the week ahead with the banks, including Club names Wells Fargo , Goldman Sachs , and BlackRock . As Jim discussed during Friday’s annual meeting, one major policy shift under the Trump administration is the willingness to let artificial intelligence advance relatively unfettered. While only time will tell if that stance ultimately leads us to a dystopian or utopian outcome, given the longer-term impact on the job market — the near-term result is, in our view, significant growth as companies and sovereign entities spend seemingly infinite amounts in the race to automate with AI. That dynamic stands to drive the entire market as demand for AI draws in demand for sectors beyond technology and semiconductors, such as infrastructure and energy, to support the workloads. At the same time, as AI becomes more advanced and companies begin to more deeply integrate the technology into their operations, costs should start to come down, supporting profit margin expansion. We would be remiss not to call out the long-term consequences of automation as a robotic workforce competes with the human workforce. It’s already happening in warehouses and factory floors as we speak. Humans get tired and sick, and require health and retirement benefits, vacation days, and so on. Robots don’t need all those things that cost employers tons and tons of money every year. The other major theme highlighted at the meeting that keeps us bullish on the market, despite at times unwelcome rhetoric out of Washington, is deregulation. There is no denying the stark difference between IPOs (initial public offerings) and M & A (mergers and acquisitions) activity under the Trump administration versus what we saw during the Biden presidency. We have been anticipating this, which is why we previously initiated our position in Goldman Sachs, the premier investment bank in the world — and perhaps, the single greatest beneficiary of a government willing to let deal after deal go without a myriad of, sometimes baseless, legal challenges. While Goldman Sachs is perhaps the most straightforward way to play the IPO and M & A boom, a boom we think is only just getting started, there is no denying that the benefits will hit every sector as businesses are now free to reshape and reorganize as needed to increase efficiencies and continue to drive growth. In the end, the overall message to members is that while everyone should certainly vote based on their political views, they should invest based on the implications of the policies being passed. As non-political as we strive to be, we would be doing a disservice to members if we focused on anything other where we see the market, and more importantly the earnings power of our individual Club holdings, most likely headed as we work to process everything from corporate updates to deregulation, macroeconomic trends and geopolitical updates. (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. 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