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Hey everyone, |
Happy Monday. |
I hope you had a good weekend, because we are walking into a completely different market than the one we left on Friday. The USA won the gold in men's and women's hockey, and I can finally take this jersey off… |
There's a lot to unpack this morning, and I want to make sure you are caught up before the opening bell. |
The biggest story is tariffs. |
On Friday, the Supreme Court struck down President Trump's IEEPA tariffs. The market initially rallied on the news because traders assumed it meant tariff relief. That lasted about five minutes. |
Trump immediately pivoted to Section 122 of the 1974 Trade Act and imposed a 10% global tariff. |
By Saturday, he raised it to 15%, which is the legal maximum under that statute. |
Section 122 tariffs can remain in place for only 150 days, so the clock is ticking. |
During that window, the administration is launching Section 301 investigations on every major trading partner. When those probes are complete, they plan to enforce what they call fair tariff rates. |
The Treasury says 2026 tariff revenue will be unchanged from prior estimates because the new tariffs are designed to offset the lost IEEPA revenue. |
USMCA goods are exempt, but allies like the UK, the EU, and Japan are getting hit the hardest. |
The European Parliament is already threatening to freeze trade ratification. Germany's new Chancellor Merz says he will go to Washington with a coordinated European position. ECB President Lagarde literally walked out of Commerce Secretary Lutnick's speech at Davos because she said his anti-European rhetoric was just too much. |
That tells you everything about where the transatlantic relationship stands right now. |
On top of that, the situation in Iran is escalating. |
The New York Times is reporting that Trump is considering a targeted military strike on Iran, followed by a larger attack if they refuse to cooperate. He is reportedly open to deposing the Supreme Leader by force. |
At the same time, US-Iran talks are set to resume in Geneva on Thursday, mediated by Oman. |
Iran's foreign minister says they will not be pressured by the military buildup. |
And the Financial Times is reporting that Iran secretly agreed to a shoulder-fired missile deal with Russia. So you have diplomacy and military escalation running in parallel, and the defense sector is catching bids as a result. |
Blue Owl is the other story that demands your attention this morning. |
They permanently restricted withdrawals from a $1.6 billion private credit fund. This is not a walk-back like they tried to spin last week. This is a gate. |
They are selling roughly a third of the loan portfolio to return capital. The selloff hit Ares, Blackstone, and Apollo, too. |
Private credit is a $1.8 trillion market, and the questions about liquidity structures and AI-linked lending exposure are getting louder. Some industry veterans are comparing the warning signs to those seen before the 2008 financial crisis. |
Others say it is overstated because the loans are sold at near-face value. |
Either way, it is a story that is not going away. So join us this morning… |
The Fed is adding to the cautious tone. Governor Hammack said over the weekend that they can be very patient on rate cuts. |
Inflation has made amazing progress, but it is still a problem. And tariffs have the potential to further complicate the outlook. Fed Governor Logan echoed a similar view, saying upside inflation risks remain and that economic uncertainty persists. |
This is also a blockbuster earnings week. NVIDIA reports on Wednesday after the close. |
Analysts expect revenue and earnings to surge about 70 percent year over year. The consensus is $1.53 EPS on $65.7 billion in revenue. Oppenheimer sees a two-to-three-billion-dollar upside surprise. |
Meanwhile, OpenAI revised its spending target down from $1.4 trillion in total compute to $600 billion by 2030. Their 2025 revenue hit $13.1 billion, beating their own target. So AI spending is real, but the expectations are coming back to earth. |
Beyond NVDA, we have Home Depot on Tuesday, then Salesforce, Snowflake, Lowe's, and Zoom on Wednesday. |
Thursday brings Baidu, Dell, Zscaler, and Intuit. It is a packed week. |
This is a Monday when you need to pay close attention. |
Join us at 8:45 AM ET on TheoTrade. |
I will see you there. |
Stay positive, |
Garrett Baldwin |
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