U.S. stocks notched their sixth monthly gain for the year in July. Better than expected corporate earnings from many companies helped to push markets to record highs during the month. Additionally, the expectation of an interest rate cut by the Federal Reserve materialized on July 31st with Fed Chairman Jerome Powell announcing a 0.25% interest rate cut. He noted “trade tensions seem to be having a significant effect on the economy.” Chairman Powell was referring to the U.S. imposed tariffs on China and the associated impacts they are having on the economy and business confidence in general. Some had expected as much as a 0.50% rate cut at the Fed’s July meeting, including President Trump. What spooked markets was Powell’s comment that this cut represented a “mid-cycle adjustment,” as opposed to the beginning of sustained interest rate cuts. Our view is that although the Fed has characterized this decrease in interest rates as a one-and-done occurrence, it is likely the Fed will make additional cuts in the near term. Interestingly, on August 1st President Trump announced an additional 10% tariff on $250 billion in Chinese goods. The U.S. Federal Reserve is an independent government agency that does not make decisions based on outside influences, particularly political ones. Since the President clearly made his displeasure of the Fed decision on July 31st known, we believe he has begun to use tariffs as a means of forcing the Fed’s hand to make additional future rate cuts. With this being said, we believe that tariffs and U.S. Federal Reserve policy decisions will be the two primary forces driving markets for the remainder of the year.