Q2 Earnings Season Preview: Will Tariffs Begin To Bite?

The changing face of the UK bond market is making gilts a source of vulnerability for the government at a moment when it most needs stability.

This week alone, Britain’s central bank and fiscal watchdog have both warned of the dangers of a structural change in demand that leaves the bonds at risk of more extreme moves, or even fire sales.

The message was clear: a market once dominated by steady buyers like pension funds and the Bank of England is now dangerously exposed to the whims of flightier players such as hedge funds and foreign investors.

The problem for Prime Minister Keir Starmer and Chancellor Rachel Reeves is that the shift comes at a time when they have linked their government’s economic policy directly to the trajectory of gilt yields by sailing so close to limits of self-imposed fiscal rules.

That leaves their entire agenda at the mercy of a fickle market and heightens focus on any change in fiscal policy. Numerous flip flops haven’t helped, but the reason concerns get so quickly amplified into major bond volatility lies in an under-the-hood change in the investor base.

“The UK is facing the biggest shift in structural supply and demand globally,” said Liam O’Donnell, a fund manager at Artemis Investment Management. “If I look at the biggest buyers of gilts over the last 10 to 15 years, two of them are no longer in the market.”

In the years that followed the seismic gilt market selloff that contributed to the fall of Liz Truss’s government in 2022, the securities have proved vulnerable to any sniff of fiscal excess. The latest example came just last week, when rumors of a change of Chancellor sparked a spike in yields.

But even when the problems stem from elsewhere, the UK market gets hit hard, speaking to a deeper issue.

For decades, the UK could rely on near-insatiable demand from defined-benefit pension funds looking to match their liabilities with long-dated gilts. Yet their purchases have been dissipating at the same time as the BOE — which accumulated close to £1 trillion ($1.4 trillion) of gilts through its quantitative-easing program — has been selling down its holdings, increasing the supply of bonds as the government also seeks to borrow more.

The daunting supply combined with the withdrawal of the two largest buyers means others need to pick up the slack. Funds with global mandates are stepping in, but having been burned by UK market meltdowns in recent years from Brexit to Truss’s gilt crisis, their appetite is more price-dependent.

“The UK requires investment in the country, and I don’t think that can be relied on when the political backdrop has been such a mess,” Artemis’s O’Donnell said.

While these developments aren’t unique to the UK, in many regards the nation is at the forefront of a global change in bond-market structure. Britain is also in a particularly tight spot due to the government’s self-imposed fiscal rules. Reeves left only a £10 billion buffer against these red lines in a March fiscal statement. Since then, U-turns on spending cuts, slow growth, weak tax receipts and higher spending demands mean she is now in the red, potentially by tens of billions.

That makes movements in gilt yields — a key input into the fiscal rules since they reflect government borrowing costs — extremely pertinent. At longer maturities in particular they remain stubbornly high, and this precarious budget arithmetic has already led to a series of embarrassing policy U-turns for the government.

Worryingly for policymakers, gilt yields are proving prone to sudden spikes. In the autumn, a rapid jump stole attention away from Reeves’ first budget. Then in January, 30-year borrowing costs hit the highest since 1998, triggering further unwanted headlines for the government and teeing up a fiscal tightening in March. The market ructions caused by Donald Trump’s tariff announcements in April also hit gilts hard, pushing yields even higher.

“Low liquidity and a positional skew mean moves of a much greater magnitude than necessarily justified by the newsflow,” said James Athey, a fund manager at Marlborough Investment Management Ltd. “The ultimate cause is that supply of gilts is massive” and the government’s “budgetary maths are awful.”

Britain’s fiscal watchdog, the Office for Budget Responsibility warned Tuesday that the government was becoming more exposed to foreign investors because of waning pension demand. One of its models suggested the shift could add 0.8 percentage points to interest rates on government debt.

Some investors also point to the to the growth of hedge-fund strategies as increasing volatility. Their activity as a percentage of total volume in gilts on the Tradeweb platform was 59% in the first five months of 2025. That’s higher than peers in Europe and the US, and up from 44% in 2020.

The BOE mapped out similar concerns on Wednesday, warning a rapid unwinding of their trades poses a risk to financial stability. Governor Andrew Bailey cited last week’s moves as the latest evidence that “we are living in a period of more volatile markets.”

Source: Bloomberg Europe

Chinese authorities have proposed an important breakthrough in terms of stablecoins and digital currencies.

The move indicates that China has possibly softened a historically hardline approach on cryptocurrency trading and mining.

This was considered in a meeting in Shanghai this week by the State-owned Assets Supervision and Administration Commission (SASAC).

Shanghai Takes the Lead in Crypto Policy Discussions, Stablecoins in Focus

Shanghai, recognized as China’s primary financial hub, is at the center of this policy review. According to reports, the Shanghai SASAC organized a meeting earlier this week to discuss strategic responses to digital currencies, particularly stablecoins.

The discussion united several top government representatives and experts to examine possible policy developments based on the new asset class.

In his speech to the meeting, He Qing, director of the SASAC, stated:

The gathering had an attendance of nearly 60-70 people, which was an indicator of a wide scope of government interest relating to the subject matter.

During the session, scholars discussed the features and issues surrounding stablecoins and cryptocurrencies, providing recommendations regarding how the nation can embrace these digital currencies in the future.

Growing Regulatory Pressure and Adoption For Stablecoins

The move by China is also under pressure as domestic enterprises and international financial trends rise.

Well-established companies in China like JD.com and Ant Group are clamoring to move forward to establish a yuan-backed stablecoin and await the approval of the People Bank of China (PBoC).

These firms have attempted to provide stablecoins with an attempt to offset the U.S dollar-based cryptocurrency dominance on the world markets.

The Shanghai summit is also an indication of the interest that China is taking in the evolution of digital currencies with respect to the rising interest in cryptocurrencies across the globe.

Specifically, companies like JD.com and Ant Group are actively pursuing the possibility of obtaining stablecoin licenses in Hong Kong.

On August 1, the city will be introducing new rules regarding stablecoins, allowing legal frameworks regarding these projects.

Challenges and Regulatory Concerns Remain

Nevertheless, the central bank in China remains wary despite seeming openness to digital currencies.

Recently, Pan Gongsheng, Governor of the People’s Bank of China, spoke out, warning of the threats that digital currencies and stablecoins present to financial regulation.

During a statement made last month, Pan was emphatic about the dangers that these digital assets pose to the financial system of China.

This is in light of issues of monetary stability and the likelihood of digital currencies being used in criminal processes.

In 2021, China enacted a ban on trading and mining of cryptocurrencies to address these concerns. The prohibition also formed part of an attempt to exert control over the financial system and to diminish speculative trading.

Although the country has maintained a tough tone on cryptocurrencies, this new change of tone indicates that regulators could be changing their tone. Besides, it also comes amid soaring global interest in the digital assets space.

Shanghai’s Role as a Testbed for Crypto Regulations

Traditionally, Shanghai has remained a key hub in conducting financial reforms in China. The city, being the main international financial center in the country, receives increased authorization to come up with new policies.

Such flexibility has the potential to make Shanghai an experimental ground for new regulation in regards to stablecoins and digital currencies. With such policies being successful, they could be used as an example to the remaining part of the country.

Although the regulatory debate is just starting up in Shanghai, its leadership role in financial innovation makes the city a possible centre for forming China’s digital currency regulations.

Ongoing Developments in Cryptocurrency Enforcement

Even as China considers a policy shift, the government continues to enforce its ban on cryptocurrency trading and mining.

Chinese regulators have recently targeted one of the largest crypto exchange fraud schemes and confiscated approximately movable assets worth $300 million.

The crackdown emphasizes the continuing stride by China to fight the illegal uses of cryptocurrencies despite the recently increased interest in digital currencies.

The regulators have been keen on reducing illicit deals and fraudulent practices in the crypto world.

Panshi City Public Security Bureau of Jilin Province took the lead in the investigation, and a network of illegal transactions with virtual currencies was unveiled.

This raid, resulting in multiple arrests, serves to signal the fact that, despite China taking its steps towards a softer stance on digital assets, its efforts to avoid fraudulent and illegal practices have not been neglected.

Source: CryptoSlate

In the past 15 years, hundreds of factories with thousands of new jobs have popped up along the Interstate 35 corridor in central Texas. Among them is a $17 billion plant under construction by Samsung Austin Semiconductor in Williamson County, north of the state capital. It won’t open until next year, but it’s already set off a mini building boom among potential suppliers and other South Korean companies that want to be nearby. Beyond proximity to the new plant, industrial companies are drawn to the region for its cheap land, light regulatory touch, lack of corporate income tax and—increasingly—a local population with the know-how to perform complicated manufacturing processes.

Many of the workers who join that plant (and others in the state) will likely have gone through the labs and classrooms at Texas State Technical College, a vocational school with its flagship campus in Waco, about halfway between Austin and Dallas. There, and at TSTC’s 10 other locations, students train for careers running the array of systems that power modern factories and other industrial facilities, often learning on the same equipment they’ll find on the job. They can earn a certificate in as few as two semesters and an associate degree in four; others already in the industry sign up for shorter programs to refine their skills midcareer.

The school consults with manufacturers, trade groups and economic development authorities across Texas to shape its curricula and make sure it’s teaching the skills employers want in their labor pool. For instance, after Covid-19 hastened the push toward automation, says Roger Snow, TSTC’s dean of manufacturing, the school has tried to better prepare students for that type of work. Manufacturers, he says, are increasingly looking to combine production lines to boost efficiency, monitor them to identify slowdowns and layer on artificial intelligence to predict maintenance needs. “We do teach some level of that, how sensors work and things like that, but we’re increasing,” Snow says. “We’re adding a new class this year that deals with the holistic element of how all of this communication works.”

TSTC is drawing more students studying how to install, program and operate robots and other sophisticated electronic equipment. But the centerpiece of the school’s manufacturing education is its industrial systems program, which it is revamping and rebranding as “industrial maintenance” starting this fall. “Manufacturing, whether you’re making a silicon wafer, cement or cosmetics for Mary Kay—the equipment they’re using to do that has always had a lot of commonalities,” says Donald Goforth, who teaches basic hydraulics, pneumatics and other systems in the program. “Anything that rotates or moves has a shaft and has bearings,” he says, and “no matter how much AI you put on the piece of equipment, somebody still has to go out there and actually turn the screwdriver or turn the wrench to make the repairs.” When these students graduate, Goforth says, they’ll be able to find jobs in “any industry that builds anything.”

Vocational schools have long held an important role in the US educational system, teaching the practical skills (automotive repair, health care) that keep the everyday economy running. As the cost of college climbs and more students question the value of a bachelor’s degree, trade schools are becoming increasingly popular. Public two-year schools with a major focus on career and technical education programs have seen a 19% bump in enrollment since 2020, data from the National Student Clearinghouse Research Center show. President Donald Trump expressed support for vocational education in May, when he threatened to divert Harvard University’s billions in federal grant dollars to US trade schools. In a December survey by Data for Progress, a left-leaning think tank, 78% of likely US voters said they had a favorable opinion of trade or technical colleges, compared with only 48% who said the same about Ivy League institutions.

Enrolling more students in technical programs like TSTC’s will be crucial if the US wants to bring back manufacturing jobs and keep pace with its international rivals. In China, for instance, President Xi Jinping has urged more young people to forgo a college degree and instead attend a vocational school, in a bid to boost its pipeline of skilled laborers. (Xi oversaw a trade school while serving as party secretary in Fuzhou in the 1990s.) The country has said it aims to increase the number of vocational programs, with a goal of making them “world leading” in about a decade.

There are more than 400,000 open manufacturing industry jobs in the US, according to the Bureau of Labor Statistics—more than the number of unfilled construction and information roles combined. If the Trump administration succeeds in its push to reshore manufacturing, in part by raising tariffs on overseas suppliers, the number of manufacturing positions would only grow.

Jasmine Olivar, 19, says she opted to enroll in the industrial systems program after realizing the job market for graphic design, her high school passion, “is so oversaturated.” (The money-back guarantee the program offers didn’t hurt.) After she earns her associate degree, she plans to take a job in the Waco area. “There are many, many companies around here that are hiring straight from my program that have even come here and talked to us directly,” she says.

Snow says only a lack of seats has kept the manufacturing programs from growing faster. TSTC recently closed a culinary arts program at its outpost in Williamson County, to expand the industrial maintenance courses students want. This year it broke ground on a nearly 71,000-square-foot Advanced Manufacturing Center of Excellence to train even more students. Besides expanded industrial maintenance and precision machining classes, the center will host a new semiconductor manufacturing program. When it opens in 2027, TSTC will triple its capacity in the county for students entering manufacturing trades. Although Samsung didn’t help fund the expansion, the company is planning to tap graduates to fill roles at the plant being developed just a few miles away. As Kwee Lan Teo, head of workforce development at Samsung Austin Semiconductor, said when the school broke ground on the site: “We love the students and hire the students.”

Last year almost 900 TSTC students earned either a certificate or a degree in one of 10 manufacturing programs. Most of them, Snow says, will have no trouble finding a good-paying job. “If you don’t get multiple job offers,” he says, “it’s probably something you’re doing wrong.”

Source: Bloomberg Europe

The S&P 500 is little changed so far this week, but the benchmark stock index has surged 26% since April to all-time high levels.

Stocks this week largely shrugged off President Donald Trump's threats of more aggressive tariffs on over 20 countries set to take effect August 1. Trump also announced plans for higher levies on copper, pharmaceuticals and semiconductors.

"Investors are looking toward the end of the year into next year where fundamentals are better, and they are willing to look through some short-term uncertainty as they get there," said Chris Fasciano, chief market strategist at Commonwealth Financial Network.

After a strong first-quarter reporting season helped lift stocks, analyst estimates for second-quarter results have weakened. S&P 500 companies are expected to have increased profits by 5.8% from the year-earlier period, down from an expectation of a 10.2% gain on April 1, according to LSEG IBES.

The percentage of S&P 500 companies beating consensus estimates rose to 78% in the first quarter after the rate had declined the prior three quarters, Ned Davis Research analysts said.

"Another reading in the upper 70s would suggest that companies have a grasp not only on tariffs, but also on the broader macro environment," the Ned Davis analysts said in a note.

Reports from banks will dominate the week, including results from JPMorgan Chase, Bank of America and Goldman Sachs. Among the other major companies reporting next week are Netflix, Johnson & Johnson and 3M.

In focus will be whether executives indicate if they are able to forecast and make decisions in areas such as capital investment and hiring despite the still-shifting trade backdrop, Fasciano said.

"The uncertainty hasn't gone away, but I'm curious to see how much of the uncertainty they feel they have a better understanding of in terms of longer-term plans," Fasciano said.

The impact of tariffs will also be at issue with the consumer price index for June, due on Tuesday, which will shed light on inflation trends. CPI is expected to increase 0.3% on a monthly basis, an acceleration from the prior month, according to economists polled by Reuters. A busy week of economic data will also be highlighted by monthly retail sales on Thursday.

Investors are eager for the Federal Reserve to resume interest rate cuts, but central bank officials have cited worries that tariffs will drive inflation higher as reasons for holding off on changing monetary policy.

Source: Yahoo Finance

While President Donald Trump’s recently signed “One Big Beautiful Bill” (OBBB) has more provisions than one could ever hope to break down in an article, it’s big on tax changes, including those that will affect retirees.

Check Out: Trump Wants To Eliminate Income Taxes: Here’s How Much Extra You’d Take Home If You Make $125K a Year

Overwhelmed at understanding it, I turned to ChatGPT to learn more about what it means specifically for retirees and their taxes (with fact-checking, of course!).

Here’s what ChatGPT said.

Temporary Relief on Income Tax Brackets — But a 2026 Cliff Still Looms

One of the big things that the OBBB does is extend many of the tax breaks originally introduced under the 2017 Tax Cuts and Jobs Act (TCJA). However, it did make some adjustments that retirees need to pay close attention to.

The OBBB maintains the current lower income tax brackets from the TCJA for now, “which means retirees pulling from IRAs, 401(k)s, or other taxable retirement accounts will likely continue to benefit from lower marginal rates through at least 2025,” ChatGPT pointed out.

However, some of those provisions will still end in 2026 unless further legislation is passed. “That means higher taxes on retirement income could be around the corner — especially for those who delay Required Minimum Distributions (RMDs) or Roth conversions,” ChatGPT said.

Roth Conversions May Be More Attractive for Now

With current income tax rates remaining lower, it might be a good idea for retirees to consider converting their pretax retirement savings into Roth IRAs, ChatGPT suggested, “locking in today’s lower rate and avoiding potentially higher taxes in future years.”

While the OBBB doesn’t restrict Roth conversions, ChatGPT pointed out that it does underscore how limited a window retirees have to take advantage of current tax policy.

Estate Tax Planning Needs Attention

Not only does the OBB uphold the estate tax exemption, which was scheduled to sunset in 2026, but it increases it to $15 million per individual. ChatGPT suggested, “Retirees with larger estates should start working with advisors now to explore gifting strategies, trusts, or other tools while current limits are still in place.”

Standard Deduction Preserved — Good for Retirees With Modest Itemized Deductions

The OBBB permanently extends the doubled standard deduction, an added benefit to retirees who no longer itemize deductions like mortgage interest or large charitable contributions, ChatGPT informed me.

“This simplifies filing and reduces taxable income for many,” it wrote. Retirees who do still itemize won’t benefit from this change, unfortunately.

Source: Yahoo Finance

U.S. Marines on the streets of Los Angeles. Masked immigration officers at courthouses and popular restaurants. Bans on travelers from more than a dozen countries.

For senior White House aide Stephen Miller, the architect of President Donald Trump's immigration crackdown, things were going according to plan.

He'd set an aggressive quota of 3,000 arrests per day in late May, and the efforts to meet that goal pushed U.S. immigration officers into more communities and businesses, triggering protests and political tensions with Democrats.

Then the president called Homeland Security Secretary Kristi Noem, who was in Los Angeles with other immigration officials in mid June, according to three former U.S. officials with knowledge of the call.

"He said: 'We’re going to do this targeted,'" one of the three former U.S. officials said. "Everybody heard it.”

U.S. Immigration and Customs Enforcement paused raids on farms, hotels, restaurants and food processing plants after the call, the former officials said. Trump was not aware of the extent of the enforcement push, one of the former officials told Reuters at the time, and "once it hit him, he pulled it back."

The pause was short-lived. ICE rescinded the guidance days after it was issued, leaving some officials confused about how to proceed.

The episode illustrated a moment of dissonance within Trump's immigration team, which has otherwise appeared to be in lock step on strategy, two of the former officials said. It was a sign that Miller's no-holds-barred approach could go too far, even for the president, they said.

A White House official said there was no daylight between Miller and Trump and Miller's approach to immigration enforcement had not made farms a primary target. The official also said the initial ICE directive pausing raids had not been authorized by top administration leaders.

Miller, 39, has long been known as obsessed with immigration but now wields immense power over multiple areas in the West Wing as deputy chief of staff for policy, an increase in influence since Trump's 2017-2021 presidency.

Under his leadership, the Trump administration has doubled immigration arrests, pushed the legal limits of deportations, blocked travelers from 19 countries, moved to restrict birthright citizenship and helped Republicans pass a spending law that devotes an estimated to immigration enforcement.

Miller also has been a prominent voice on many of the president's other priorities, including countering diversity initiatives and targeting transgender rights. He is one of a small group of White House staffers who approve all executive orders, a person familiar with the matter said.

But when it comes to immigration, Miller pushes experimental policies that test the bounds of the Constitution, three former colleagues said, including a challenge to birthright citizenship, enshrined in the 14th Amendment.

"He just has a worldview that he is 100% sure of,” one Republican official said.

In a social media post urging Republicans to support the spending package Trump signed into law last week, Miller suggested society could crumble if the bill failed to pass.

"Republicans have spent generations promising Americans full, complete and total border security," he wrote in a post on X. "Now is the moment to fulfill the promise on which the fate of civilization itself depends."

Critics say Miller is stoking nativism for political purposes and endorsing policies that seem crafted for cruelty rather than effectiveness.

Administration officials, including Noem, praised Miller for his loyalty to Trump and said he was instrumental in shaping the administration's immigration agenda.

“Stephen's passion, patriotism and persistence help fuel this administration in our efforts to carry out the largest deportation of criminal illegal aliens in the history of our republic," she said in a statement to Reuters.

UNPRECEDENTED INFLUENCE

Trump recaptured the White House in part by campaigning to curb illegal immigration, saying millions had entered unlawfully under former President Joe Biden and portraying them as dangerous criminals who needed to be removed. Miller was a central figure driving that narrative and championed the policies that have fueled Trump’s aggressive crackdown.

Initially, immigration was Trump's strongest-polling issue, but public approval slipped to 44% in mid-June from 47% a month earlier as the crackdown accelerated, according to a Reuters/Ipsos poll.

The unprecedented influence Miller now has over the U.S. immigration system stems from his lengthy and close relationship with Trump, colleagues said.

"He was there from the very, very beginning of the Trump phenomenon,” said Marc Short, former chief of staff to Vice President Mike Pence. “He has stayed loyal throughout the first administration to the president and to this day."

Miller, who is married with three young children, established himself as a major policy figure during Trump’s first term. He was remarkably driven and assertive, and used the same tone with colleagues as he did in appearances on TV, a former Trump administration official said.

“It was hard to get a word in edgewise,” the former official said. “He’s not very interested in what you think. It’s not a collaborative conversation. If you try to engage, he will talk over you.”

Miller called senior homeland security officials so often that they needed a dedicated staffer to talk to him, the former official said.

The direct outreach to agency staffers has carried over into the current administration, according to one current and one former official.

Two former officials said the threat of crossing Miller and then getting fired and potentially blacklisted by Trump and his political allies also contributed to his authority.

Miller co-founded the conservative advocacy group America First Legal after Trump left office in 2021, which filed or supported lawsuits over immigration policies and other issues.

In the second Trump administration, in addition to his deputy chief of staff role, Miller helms the White House's Homeland Security Council, which coordinates immigration and other domestic security policies within the administration.

Miller came in with all of his staffers in place, a contrast to other areas within the National Security Council, and appears to operate more independently, a person familiar with the matter said. “He was ready to rock and roll on Day One,” the person said.

While dozens of officials were fired from the NSC as part of a downsizing, Miller’s homeland group remained unaffected, the person said.

'XENOPHOBIC WORLD VIEW'

Miller grew up in Santa Monica, California, where about a quarter of residents are foreign born. He embraced conservative ideas as far back as high school and developed a reputation early in his political career as a provocateur.

He attended Duke University in North Carolina where he stood out for his defense of white lacrosse players who had been accused of raping a Black woman working as a stripper in 2006, writing about the prominent case in newspaper columns and appearing on Fox News. The accusations were determined to be a hoax, which the woman admitted last year.

Democrats have criticized Miller as the driving force behind Trump's harshest policies.

A group of congressional Democrats who in 2019 called Miller “a far-right white nationalist with a racist and xenophobic world view" included Karen Bass, who is now the mayor of Los Angeles and has clashed with the Trump administration over ICE raids there.

Miller's wife, Katie Miller, was an aide to billionaire Elon Musk during his roughly four-month stint at the White House. She departed to work for Musk after he left in late May. Current and former Trump officials gave no indication that Trump's off-and-on friction with Musk had caused tension between the president and his longtime aide.

Nearly a month after Trump's call and the back-and-forth over ICE raids, Miller's crackdown continues.

On Tuesday, U.S. Agriculture Secretary Brooke Rollins would not receive "amnesty" and that the administration wants an entirely American workforce.

In Los Angeles, federal agents flanked by heavily armored U.S. troops marched through a city park in a show of force that angered local officials.

Trump called Miller "our star" when introducing him last week at the opening of a migrant detention center officials dubbed "Alligator Alcatraz" because of its location in the Florida Everglades, a subtropical wetland teeming with reptiles and other wildlife.

Speaking at a roundtable with Miller and Noem, Trump said even Miller would respect how Noem had handled her role. "I don't think he likes anybody," Trump said.

Miller, in turn, praised Trump for empowering ICE and Border Patrol to step up immigration enforcement and using legal tools and diplomacy to ramp up deportations.

"Watching what you've done, sir, has been one of the honors of a lifetime," Miller said. "I'm proud to be able to play any role in it."

Source: Reuters