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Tom Essaye: Markets Expect ‘Cooler Heads’ to Prevail in U.S.-China Trade Tensions

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Sevens Report says tariff threats are unlikely to weigh heavily on stocks unless a full-scale trade war erupts.

Markets believe U.S., China will find trade compromise – Sevens Report Research

According to Sevens Report Research, investors remain largely unfazed by renewed U.S.-China trade tensions, with markets betting that both sides will ultimately compromise. Tom Essaye noted that while President Trump’s tariff threats and Beijing’s export limits on rare earths have raised concerns, optimism ahead of a planned meeting between Trump and Xi Jinping has kept sentiment stable. Essaye said “scary headlines” are unlikely to drive markets lower as long as traders believe a full-blown trade war can be avoided. For now, stock direction remains more influenced by economic growth and AI enthusiasm.

Also, click here to view the full article published in Investing.com on October 21st, 2025. However, to see the Sevens Report’s full comments on the current market environment sign up here.

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Are Negative Trade War Headlines a Risk to the Rally?

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What’s in Today’s Report:

  • Are Negative Trade Headlines a Risk to the Rally

Futures are modestly lower amid light profit taking after a mostly quiet night of news as traders await more important earnings releases due out this week.

There were no notable economic reports overnight and no material developments on either the U.S.-China trade front or the government shutdown negotiations.

There are no economic reports today, however the Treasury will hold 4-Week, 6-Week, 8-Week, and 4-Month T-Bill auctions between 11:00 and 11:30 a.m. ET. Bill auctions typically do not warrant much attention, but yesterday’s strong short-term Treasury auctions did coincide with a slowdown in the S&P 500’s intraday advance as economic angst seems to be building in the absence of major data recently.

There is one Fed speaker to watch today with next week’s October FOMC meeting coming into view: Waller (9:00 a.m. & 3:30 p.m.) and anything less than the dovish-leaning tone of recent could weigh on stocks.

Finally, earnings season continues with: KO ($0.78), GE ($1.46), LMT ($6.33), MMM ($2.10), NFLX ($6.89), ISRG ($1.99), and COF ($4.20) all due to report today, and investors will want to continue to see net positive surprises on both the top and bottom line to support optimism surrounding strong and resilient corporate financials in H2’25.

 

How To Navigate An “AI Bubble” (If One Exists)

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What’s in Today’s Report:

  • How To Navigate An “AI Bubble” (If One Exists)

Futures are sharply lower following sweeping tariff announcements by the administration overnight.

The Trump administration made numerous reciprocal tariff announcements and while the vast majority of them were previously reported, the sheer volume of tariffs is weighing on sentiment.

Focus today will be on economic data and specifically the jobs report and ISM Manufacturing PMIs.  Expectations for the jobs report are: 110K Job-Adds, 4.2% UE Rate and 3.7% y/y Wages) while the ISM Manufacturing Index expectation is 49.5.

Given the early, tariff related weakness in stocks, a “Too Cold” jobs report or ISM Manufacturing PMI could accelerate the selling as they would compound worries that high tariffs will hurt future growth.  So, solid numbers from both are needed to push back on this morning’s tariff anxiety.

Finally, on earnings, today is the last meaningful day and some reports we’re watching include: BRK.B ($5.24), XOM ($1.49), CVX ($1.66), D ($0.69), CL ($0.89), KMB ($1.68).

 

What Could Go Wrong? (Four Candidates)

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What’s in Today’s Report:

  • What Could Go Wrong?  (Four Candidates)
  • Weekly Market Preview:  A Busy and Important Week of Fed Decisions, Earnings and Economic Data
  • Weekly Economic Cheat Sheet:  Jobs Report and ISM Manufacturing PMIs Friday Are the Highlights

Futures are modestly higher on the announcement of a U.S./EU trade deal and further delay in tariff increases for China.

The U.S. and EU agreed to a trade deal this week with details that are largely in-line with market expectations at the end of last week.

The U.S. and China agreed to a 90-day extension of their tariff pause to continue to work on a larger trade deal.

This will be a busy and important week from an economic standpoint, but it starts quietly as there are no reports today.

Similarly on earnings, this is the most important week of the year with earnings looming from major tech firms (MSFT/META/AAPL/AMZN) but it starts quietly.  Some reports we’re watching today include: WM ($1.88), WHR ($1.54), WELL ($1.22).

 

The TACO trade is the new Trump trade. Here’s what to know about the meme ruling the stock market.

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  • A new acronym is making its rounds on Wall Street: TACO
  • “Trump Always Chickens Out” refers to markets betting on Trump walking back tariff proposals.
  • Trump called the TACO moniker “nasty” when asked about it on Wednesday.

With TACO, investors have a new guiding principle.

“Buy the Trump tariff dip. Essentially, Trump has proven to investors that he won’t actually follow through with draconian tariffs,” Tom Essaye of the Sevens Report wrote on Wednesday. “As such, any sell-off following a dramatic tariff threat should be bought.”

Retail investors have adopted the strategy, with dip-buying at historic levels recently. But how long the TACO trade will remain effective depends on what happens after the tariff delays unwind over the summer.

Click here to view the full article in MSN.com from May 29, 2025.

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Three Important Takeaways from Last Week

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What’s in Today’s Report:

  • Three Important Takeaways from Last Week
  • Weekly Market Preview:  Can Trade War De-escalation Continue?
  • Weekly Economic Cheat Sheet:  Is Growth Still Solid? (First April Readings This Week)

Futures are sharply higher on further de-escalation of the global trade war over the weekend.

The Trump Administration exempted most electronics from Chinese and reciprocal tariffs, reducing the tariff headwind on the economy and further de-escalating the trade war.

This week has several important economic reports looming but today the calendar is quiet.

So, focus will stay on trade headlines while we also get several Fed speakers including Barkin (12:00 p.m. ET), Waller (1:00 p.m. ET), Harker (6:00 p.m. ET) and Bostic (7:40 p.m. ET).

Finally, earnings season continues to heat up and reports we’re watching today include GS ($12.71) and MTB ($3.41).

Making Sense of Wednesday’s Trade Headlines (That Caused the Selloff)

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What’s in Today’s Report:

  • What to Make of Wednesday’s Trade Headline (That Caused the Selloff)
  • What Does Escalating Trade Noise Mean for Markets Into Year-End?

Futures are little changed as markets digest yesterday’s potentially negative U.S./China trade headlines along with more headlines overnight, as the trade noise grows louder.

The trade headline whiplash continued overnight as Chinese Vice Premier He said he was “cautiously optimistic” about a phase one deal being signed.  This is helping, somewhat, to counter yesterday’s headline about a deal slipping into 2020.

There were no economic reports out overnight.

Today there are some important economic reports, but the biggest issue today will be whether President Trump signs the bill passed by Congress supporting democracy in Hong Kong (if he does, that could complicate trade talks).  He is expected to sign the bill, although that’s not a high conviction expectation.

Looking at actual economic data, we have two important reports today, Jobless Claims (219K) and Philadelphia Fed (E: 7.5) and one housing number, Existing Home Sales.  As has been the case, the stronger the data, the better for stocks.  We also have two Fed speakers, Mester (8:30 a.m. ET) and Kashkari (10:10 a.m. ET), but neither should move markets.

Tom Essaye Interviewed with TD Ameritrade Network on November 20, 2019

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Tom Essaye interviewed with Oliver Renick from TD Ameritrade, discussing Bonds vs Equities, trade war, yield curve, reflation and more…Click here to watch the full interview.

Tom Essaye with TD Ameritrade

Clearing the Trade War Fog

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What’s in Today’s Report:

  • Clearing the Fog: Where Are We on U.S.-China Trade?

U.S stock futures are trading lower and international markets saw broad declines overnight thanks to escalating trade tensions between the U.S. and China.

The Senate passed a bill late Tuesday in support of the Hong Kong protests to which the Chinese Foreign Ministry has issued a strong statement of disapproval for.

Additionally, Trump threatened higher tariffs at a cabinet meeting yesterday and the combination is weighing on sentiment.

There are no economic reports today and no Fed officials scheduled to speak but the minutes from the October FOMC Meeting are due out at 2:00 p.m. ET which will be closely watched for further clues on the Fed’s future policy plans.

The trade war is still dominating markets right now so investors will be watching for any rebuttals from the U.S. regarding China’s negative response to the “Hong Kong bill” or any additional talk of future tariff policy from either the U.S. or China.

Is Europe a Buy?

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What’s in Today’s Report:

  • How Powerful Is the Growth to Value Rotation?
  • Is Europe a Buy?

Futures are edging higher in early trade while most international markets rallied on better-than-feared data overnight.

In Europe, the headline to the German ZEW Survey was a slight miss but business expectations rebounded to -2.1 vs. (E) -12.5 as recession fears continued to moderate.

In the U.S., the NFIB Small Business Optimism Index was 102.4 vs. (E) 102.0 another incremental economic positive.

With no economic reports today, focus will be on Trump’s midday speech in NY regarding the trade war. Additionally, there are two Fed speakers: Harker (1:00 p.m. ET) and Kashkari (6:00 p.m. ET).

The trade war is still by far the most important influence on the markets right now so whether Trump is negative or positive in his discussion regarding trade negotiations today will likely decide whether stocks rally or extend yesterday’s pullback this afternoon.