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July 24, 2025 – Like the game of Go in China, or Igo in Japan, the evolving tariff negotiations between the U.S. and our trading partners are creating a constantly changing gameboard and continue to dominate the news cycle. Markets reacted positively yesterday to indications that Japan’s tariffs would be capped at 15%, less than the 25% expected, and a potential deal with the European Union. Tariffs are already having an impact on corporate earnings and outlooks, although equity markets continue to gain ground.

//  by Tower Bridge Advisors

Let’s Go
The game of Go, also known as Igo in Japan, is a two-player strategy board game. Players aim to control more territory on a grid board by surrounding empty spaces with their stones and capturing opponent’s stones. The game ends when both players pass their turns, indicating they cannot improve their position. The board is constantly changing as players build territories and capture stones, making for a dynamic and evolving game much like the current tariff negotiations.

The U.S. Government reached a trade deal with Japan yesterday that will impose 15% tariffs on imports, including automobiles. The deal includes a $550 billion fund to make investments in the US, with Japan agreeing to provide the funds to invest in projects in America. Japan will also buy 100 Boeing# aircraft, boost rice purchases, and buy $8 billion in agricultural and other products, while hiking defense spending with U.S. firms.

On the flip side, the European Union (EU) plans to hit the US with 30% tariffs on about $100 billion worth of goods if the administration carries through with its threat to impose that rate on most of the EU’s exports after August 1st. Reports circulated yesterday that the US and EU were nearing a deal that would impose a 15% tariff on European imports, similar to the deal with Japan, but with the possibility of exemptions for specific products such as aircraft, alcohol, and medical devices.

Earnings reports and tariff impacts
Based on recent earnings releases, several companies have specifically mentioned or highlighted the impact of tariffs on their financial performance. General Motors# reported a significant $1.1 billion hit to its second-quarter core profit due to tariffs, and warned of a potentially larger impact in the third quarter. RTX Corporation# lowered its overall 2025 profit forecast, but now expects a $500 million headwind from tariffs, down from an initial $850 million estimate. Stellantis, the maker of Jeeps, warned of a loss in the first half of 2025, partially attributed to the impact of US tariffs, which are estimated to have cost the company around $2.7 billion. Danaher#, the science-equipment producer, mentioned a tariff exposure of a couple hundred million dollars in the second quarter. However, this is down from a $350 million prior estimate as the company noted that mitigation strategies have largely offset the impacts. Coca-Cola# expects the tariff impact on its business to be manageable, but has moderated its full-year profit expectations. While tariff commentary by management teams is indicative of the economy-wide impact, market reaction has been both positive and negative depending upon expectations and the severity of any earnings hit.

Early Q2 earnings are good to go
Second quarter earnings season is off to a generally positive start. The blended earnings growth rate for Q2 S&P 500 earnings currently stands at 5.6%, better than the 4.9% expected about a month ago. Of the 12% of S&P 500 companies that have reported for Q2, 83% have beaten consensus EPS expectations, above the 77% one-year average. In aggregate, companies are reporting earnings that are about 8% above expectations. Banks have dominated the reporting thus far with macro themes revolving around a still healthy overall consumer, benign credit, and an improving investment banking pipeline of deals. Looking ahead, earnings are expected to increase 6% in Q3 and 7% in Q4. For all of 2025, earnings are expected to increase by about 9%. That would be a healthy outcome if realized, but tariff developments could be a game-changer once again.

Alphabet# (Google’s parent), is one of the first Magnificent 7 stocks to report earnings, and came through with a positive earnings surprise versus expectations yesterday. However, in order to achieve future growth, Alphabet will be increasing its capital expenditures by $10B more than its previous guidance this year. Google’s advertising revenue growth trends were positive, with both Search & YouTube growth accelerating. Google’s operating margin remained at a 12-year high and Google Cloud growth accelerated to 32%. The stock is reacting positively pre-market.

Go For It
We have not seen a major economic slowdown, job losses or significant inflationary pressures from tariffs yet, although the second half of 2025 could witness an uptick in these metrics based on earnings commentary. The next meeting of the Federal Reserve to decide interest rate policy is next week, though no policy change is expected. Expectations continue to focus on two rate cuts this year at one-half percentage point at a time. Against a tumultuous backdrop, the 10-year Treasury yield has traded in a range of 4.0-4.8% over the past six months, and now sits at 4.4%.

For now, trade negotiations make for volatile markets on the upside and downside. Like the game of Go, this tariff turmoil ends when no more ground can be taken by either side. Meanwhile, despite all of the volatility in markets and interest rates, the S&P500 and Nasdaq are both up over 8% this year and at record closing highs. A few more Go stones need to be placed on the gameboard to solidify our trade and tariff position, which would go a long way toward calming markets down.

Jennifer Lopez turns 56 today, Kristin Chenoweth turns 57, and Barry Bonds hits 61. The fact that Amelia Earhart was born on this day in 1897 and attended the Ogontz School in Rydal, PA, was not lost on us.

Christopher Crooks, CFA®, CFP® 610-260-2219

Tower Bridge Advisors manages over $1.3 Billion for individuals, families and select institutions with $1 Million or more of investable assets. We build portfolios of individual securities customized for each client's specific goals and objectives. Contact Nick Filippo (610-260-2222, nfilippo@towerbridgeadvisors.com) to learn more or to set up a complimentary portfolio review.

# – This security is owned by the author of this report or accounts under his management at Tower Bridge Advisors.

Additional information on companies in this report is available on request. This report is not a complete analysis of every material fact representing company, industry or security mentioned herein. This firm or its officers, stockholders, employees and clients, in the normal course of business, may have or acquire a position including options, if any, in the securities mentioned. This communication shall not be deemed to constitute an offer, or solicitation on our part with respect to the sale or purchase of any securities. The information above has been obtained from sources believed reliable, but is not necessarily complete and is not guaranteed. This report is prepared for general information only. It does not have regard to the specific investment objectives, financial situation or the particular needs of any specific person who may receive this report. Investors should seek financial advice regarding the appropriateness of investing in any securities or investment strategies discussed in this report and should understand that statements regarding future prospects may not be realized. Opinions are subject to change without notice.

Filed Under: Market Commentary

Previous Post: « July 21, 2025 – Last week was a quiet week for news. The real heart of earnings season starts to kick in this week. Meanwhile the new crypto legislation signed into law last week is likely to change our lives a lot more than what we will learn from a few earnings reports.
Next Post: July 28, 2025 – The world looks pretty healthy but rising speculation elevates our concern. When the amount of corporate money flowing into bitcoin is twice the amount raised in initial public offerings to date, that gets our attention. With that said the focus this week will be on earnings and a slew of economic data on inflation, interest rates, and employment, all of which can be market moving. »

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  • August 14, 2025 – The market is increasingly divided, with a strong AI-driven rally on one side and a weakening consumer economy on the other. This contradiction creates a significant risk of a sudden economic downturn or stagflation, as soaring tech valuations may be unsustainable without broader economic support.
  • August 11, 2025 – There is an expression that rationality requires separating the wheat from the chaff. In Wall Street, to be a successful investor, it is necessary to separate hype from reality. That is particularly important as speculative fever rises. Some of the hype is real; some is nonsense. Don’t simply follow consensus. As investors you invest in companies, not hype, not single products, hot today but cold as ice tomorrow. Think rationally and you will be a successful investor.
  • August 7, 2025 – Football is considered a game of inches. Consider the “Brotherly Shove,” popularized by the Philadelphia Eagles, which is a play used to gain very short yardage and advance down the field. In order to counter this offense, defensive opponents have employed various tactics, but without much success. Two consumer-focused companies, McDonalds and Disney, recently reported quarterly earnings, and are slugging it out on the field as consumer preferences change and these companies try to adapt.
  • August 4, 2025 – Confusing economic reports on GDP and the labor market can be decoded to show that growth in the first half of 2025 was muted while inflation was well contained before the full impact of tariffs. If those data trends continue, look for one to three 25-basis point rate cuts before the end of 2025. That outlook may change with subsequent data but it is increasingly clear that an economy that has proven so resilient may need a bit more help to offset the impact of tariffs and significantly lower population growth.
  • July 31, 2025 – The U.S. economy demonstrated a strong rebound in Q2 2025 with 3.0% GDP growth. Tech giants Microsoft and Meta significantly exceeded earnings expectations, fueled by the ongoing AI boom and robust cloud and digital advertising performance. While the current AI-driven market rally shows parallels to the dot-com era’s speculative growth, today’s tech giants exhibit stronger financial fundamentals than many during the earlier boom. Investors should balance the allure of high growth with valuation discipline and diversification to mitigate risks in this dynamic market.
  • July 28, 2025 – The world looks pretty healthy but rising speculation elevates our concern. When the amount of corporate money flowing into bitcoin is twice the amount raised in initial public offerings to date, that gets our attention. With that said the focus this week will be on earnings and a slew of economic data on inflation, interest rates, and employment, all of which can be market moving.
  • July 24, 2025 – Like the game of Go in China, or Igo in Japan, the evolving tariff negotiations between the U.S. and our trading partners are creating a constantly changing gameboard and continue to dominate the news cycle. Markets reacted positively yesterday to indications that Japan’s tariffs would be capped at 15%, less than the 25% expected, and a potential deal with the European Union. Tariffs are already having an impact on corporate earnings and outlooks, although equity markets continue to gain ground.
  • July 21, 2025 – Last week was a quiet week for news. The real heart of earnings season starts to kick in this week. Meanwhile the new crypto legislation signed into law last week is likely to change our lives a lot more than what we will learn from a few earnings reports.
  • July 17, 2025 – Stocks rebounded after President Trump clarified his stance on Federal Reserve Chair Jerome Powell. While consumer and producer price indexes suggest some inflation moderation, particularly in services, certain tariff-exposed goods continue to see price increases. Despite these pressures, the U.S. economy shows underlying strength, exemplified by strong bank earnings and robust consumer spending, though the long-term impact of escalating tariffs remains a key uncertainty.
  • July 14, 2025 – Tariffs and earnings will be in the bullseye of investor focus for the next three weeks. Earnings should be good with the weak dollar giving a boost to reported foreign results. As for tariffs, the announcements are likely to be scarier than the coming reality. But even with more muted final outcomes, the likely overall tariff picture will almost certainly be the most severe since the early 1930s. Tariffs will affect different companies in different ways, a factor likely to lead to an increasing dispersion in stock performance in the months ahead.

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