Tariff costs land; Silver’s quiet rally

This Chart Pattern Looks Just Like TIO in Early 2023

Traders who got in early on $TIO saw outsized gains once the volume picked up. We’re seeing something similar again — and it's not on the radar yet.

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Good Morning,

– Truly yours, Fred Frost

📈 Yesterday's Market Recap

U.S. equities finished lower on Wednesday as major indexes extended a pullback from recent highs amid mixed bank earnings and weakness in big tech. The S&P 500 and Nasdaq both declined while small caps and commodities showed relative strength, underscoring uneven sector leadership. Treasury yields eased and safe-haven assets climbed as investors weighed data and corporate results.

• Major Indexes Close Lower: The S&P 500 fell roughly 0.5%, the Nasdaq dropped about 1%, and the Dow edged lower as broad market sentiment softened. → Associated Press
• Commodities Rally: Gold and silver hit fresh record highs as investors sought safe havens amid market volatility and macro uncertainty. → Investopedia
• Selective Breadth: Some Stocks Buck Trend: Bank of New York Mellon hit a 52-week high even as broader markets struggled, showing pockets of strength. → MarketWatch

📉 Daily Performance Snapshot

🔭 What to Watch Today

Futures can smile all they want — today’s real tells are in earnings, Capitol Hill risk, and whether rates behave like adults. Keep it simple: watch what moves cash flows and discount rates.

💡 Opportunity Watch

Markets are pretty good at pricing headlines and pretty bad at pricing second-order effects. Today’s “opportunities” are mostly about where cash flows quietly re-route when policy, rates, and capex drift.

• Semicapex Reality Check (TSMC / AI supply chain): If the foundry king is saying demand is real and profits are jumping, the underpriced angle may be the “picks-and-shovels” suppliers that ride the same capex wave without the headline multiples. → Benzinga
• Housing Sensitivity Trade (mortgage rates → home-adjacent names): If mortgage rates meaningfully shift, the market’s first move is usually homebuilders — but the follow-through often shows up in “boring” housing-adjacent categories (brokers, title, repairs, building products). → TheStreet
• Quiet Trade Bloc Tailwind (EU–Mercosur): A large free-trade zone isn’t a one-day market mover, but it can reshape multi-year winners in ag, autos, and industrial exporters — especially if the world keeps “re-shoring” on TV while re-globalizing in contracts. → ABC News

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🔥 The Big Bullet

Political Pressure and Tariffs Shake Up Markets

What happened: A new conflict is brewing between political leaders and the Federal Reserve, creating uncertainty in the financial world. Traders are betting on lower interest rates as political pressure fuels a rally in cryptocurrencies. At the same time, businesses are feeling the pinch from trade taxes. A recent report notes that companies are beginning to pass tariff costs along to their customers. This combination of events is causing prices to move quickly in different sectors.

Why it matters: When companies raise prices to cover tariffs, everyday goods become more expensive. Wall Street experts are now asking how these new trade taxes fit with promises to keep life affordable. Investors seem worried about the value of the dollar and are looking for safer places to put their cash. For instance, the price of silver has more than doubled since the start of last year, beating out gold. This shows that many people are preparing for bumpy times ahead.

What’s next: Keep an eye on how banks and big companies react to new government rules. Major banks are already trying to fend off caps on credit card prices. If the tension continues, stocks might struggle to stay high. The Nasdaq has already led stocks lower due to global fears. Investors should watch the upcoming inflation numbers to see if the higher costs stick.

• Why the U.S. central bank was designed to be insulated from political pressure. Covering the historical risks of politicians controlling monetary policy – Brookings
• The mechanics of how tariffs function not just as a tax on foreign countries, but as a cost often absorbed by domestic businesses and consumers – TaxFoundation.org

🧭 Policy & Market Ripples

• IRS process tweaks and “liquidity risk” quietly matter: It’s not glamorous, but anything that changes audit friction, settlement behavior, or how firms document adjustments can ripple into risk budgets and Treasury plumbing. When compliance overhead rises, market-making gets a little less “free,” and spreads don’t tighten out of patriotism. → Finance Monthly
• China’s push in Latin America keeps rewriting trade lanes: This isn’t just geopolitics for cable TV—capital, commodities, and infrastructure contracts tend to follow the flag. If Beijing keeps buying influence via ports, energy, and financing, investors should expect longer-run tailwinds (and risks) in metals, shipping, and regional FX. → World Finance
• Credit-card rate cap chatter is a stealth “business model” policy risk: Even the *discussion* of rate caps can compress multiples for lenders, fintech rails, and anyone living off revolving balances—because pricing power is the product. If this theme gains oxygen, watch for rotation toward fee-based models and away from pure interest spread stories. → Stocktwits