Good morning. Today marks the start of a new quarter. The one we just finished proved volatile, exciting, confusing, and ultimately profitable for investors who didn’t panic sell through tariffs headlines.

And history suggests the market has room to run.

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The monetary-driven bull case

Tariffs haven’t stopped the stock market from smashing new records.  

Investors are looking past trade uncertainty and pricing in a dovish pivot from the Federal Reserve. That makes rate cuts — not tariff fluctuations — a more useful explanation for the stock market’s record-breaking rally. 

While Fed Chairman Jerome Powell has warned repeatedly that tariffs could reignite inflation, the market has instead focused on the five straight months of cooler-than-expected inflation data. 

That divergence between data and narrative has helped push the S&P 500 to record highs.

In fact, the double-digit gain since April marks the benchmark’s best quarter since the end of 2023.

History suggests more record highs will follow. 

There have only been three times the benchmark index was down more than 10% and still finished a year positive. That’s looking increasingly likely to happen in 2025.

“If we closed out 2025 right here, most investors would take it,” said Mark Hackett, chief market strategist at Nationwide. “But when the market is running, good luck standing in its way.”

Meanwhile, President Trump has been vocal about replacing Powell with a central banker who will flatten interest rates, which has only added to the animal spirits rising across markets.

Goldman Sachs on Monday updated its forecast to three rate cuts in 2025 starting in September. 

“Very early evidence suggests that the tariff effects look a bit smaller than we expected, other disinflationary forces have been stronger, and we suspect that the Fed leadership shares our view that tariffs will only have a one-time price level effect,” Goldman Sachs strategist Jan Hatzius wrote in a note.

“And while the labor market still looks healthy, it has become hard to find a job, and both residual seasonality and immigration policy changes pose near-term downside risk to payrolls.”

Traders on the prediction market Kalshi have raised their bets for cuts over the last month as stocks have rallied.

Falling interest rates and cooling inflation are indeed classic tailwinds for stocks. 

It makes sense why UBS, for example, told clients this week to position for stronger equity returns in the months ahead despite lingering trade uncertainty.

“While tariff headlines could periodically unsettle markets, we do not currently see them as a catalyst for a sustained market sell-off,” said Ulrike Hoffmann-Burchardi, CIO of global equities for UBS Global Wealth Management.

It’s also notable that the White House continues to work toward more trade deals, and that stocks are entering one of the most bullish months of the year, according to data back to 1950.

To be sure, none of this is to say risks have disappeared.

The bull case, however, is beginning to crystallize for investors even with geopolitical and tariff narratives swirling. 

“After all, the equity market reflects earnings, which remain healthy courtesy of solid household spending, a robust labor market, and strong corporate balance sheets,” said Seema Shah, chief global strategist at Principal Asset Management. 

Market snapshot

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Elsewhere

📊 Robinhood is going all in on crypto. The brokerage announced a slate of products Monday including “tokenized” stocks and ETFs for European investors, as well as crypto staking for Ether and Solana. It’s following in the footsteps of Gemini and Kraken in a bid to become a central hub for digital assets. (CNBC)

📉 The US dollar has weakened all year. The currency is seeing one of its weakest first halves of a year in the last four decades. The ICE USD Index has dropped more than 10% in 2025, while the WSJ Dollar Index has fallen more than 8% for its worst drop since 2002. (WSJ)

Rapid-fire

Last thing

About me

📰 I’m Phil Rosen, co-founder and editor-in-chief of Opening Bell Daily. I’ve published books, lived on three continents, and won awards for my journalism, which has appeared in Business Insider, Fortune, Yahoo Finance, Bloomberg and Inc. Magazine.

I write our flagship newsletter to prepare you for each trading day — unpacking markets, economic data and Wall Street with analysis you won’t find anywhere else.

Feedback? Reply to this email, ping me on X @philrosenn, or write me directly at phil@openingbellmedia.com.