Markets Expect More Trade Negotiations, Says Stealey

Trade and Tariffs - The market is showing fatigue towards tariff headlines, anticipating room for negotiation in trade talks [2] - The market expects potential trade deals, preferring them over high tariffs, leading to current calmness [3] - Average tariff levels are expected to be slightly higher, but not reaching the high levels seen in early April [5] - Uncertainty remains regarding how much tariffs will be passed on to corporations versus absorbed by consumers, impacting consumer spending patterns [10] Monetary Policy and Fiscal Outlook - The Federal Reserve's September decision will heavily rely on the jobs report [7][8] - Tariffs are seen as a revenue source to fund additional spending, potentially leading the US Treasury to issue more short-term debt to keep funding costs down [13] - Aggressive rate cuts by the Fed could lead to higher back-end yields, advocating for curve steepness [19] - The market is closely watching the private sector's willingness to buy government bonds, as they are now the primary price setters [14][15] UK Gilts Market - Concerns persist regarding the UK's fiscal situation and funding, especially with slowing growth [20] - Stability and the Bank of England's proactive rate cuts could make gilts attractive [22]