Markets ended modestly lower last week as the losses were caused by inflation concerns driven by tariff actions. The week saw the Trump administration sending out a string of tariff letters to trading partners indicating that they will be facing higher tariffs starting August 1 if they cannot work out better trade terms for the U.S. That included Japan and South Korea, which face a 25% tariff rate.
The situation then worsened as Brazil received a tariff letter announcing a 50% tariff rate, and then Canada got one that sets a 35% tariff rate on imported goods not covered by the USMCA. For good measure, it was reported that the EU will shortly be getting one of these tariff letters. President Trump declared that most trading partners will see a tariff rate of 15% to 20%, which is higher than the current 10% baseline tariff. Finally, the tariff drama also featured a proposed 50% tariff on copper imports starting August 1 and the threat of a potential 200% tariff on pharmaceutical imports.
The market did show remarkable resolve in the face of the tariff news with the Nasdaq making new highs and NVDA surpassing $4 trillion in market capitalization. The mega-caps as a group outperformed the S&P 500 with the Vanguard Mega-Cap Growth ETF (MGK) finishing the week with a modest gain.
The best-performing sectors of the week were energy (+2.5%), utilities (+0.8%), industrials (+0.6%), information technology (+0.2%), and consumer discretionary (+0.1%). The biggest laggards were the financials (-1.9%), consumer staples (-1.8%), and communication services (-1.2%) sectors.