The July 8 tariff deadline approaches… will we get extensions?… the Fed’s interest rate bind… profiling Luke Lango’s trading system… two rare earth stocks for your radar
July 8…
Ring any bells?
We’re less than two weeks away from the official expiration date of President Trump’s 90‑day pause on broad “reciprocal” tariffs.
Meanwhile, only one trade deal has been finalized with the U.K. And frankly, it’s less of a “deal” and more of a broad “framework.” Roughly 17 other deals remain in negotiation.
Not extending the tariff pause would mean President Trump’s sweeping “Liberation Day” tariffs snap back into effect at elevated levels – generally a 10% baseline plus further reciprocal tariffs on countries that fail to reach a deal.
For example, for the European Union, its 10% tariff could jump to 50% as soon as July 9…two weeks from today.
The good news is that Treasury Secretary Scott Bessent recently stood before Congress and told lawmakers:
It is highly likely that those countries … who are negotiating in good faith, we will roll the date forward to continue good‑faith negotiations.
If someone is not negotiating, then we will not.
The markets have priced in a boatload of extensions. So, if negotiations fail, well, look out.
Now, we believe the extensions will come. But we have the luxury of not needing to know specifics or timing. Wall Street wins if the can is kicked down the road.
But the Federal Reserve doesn’t have such a luxury…and that complicates its policy going forward.
To cut or not to cut, that is the question
In recent days, two Fed members have hinted that rate cuts could come in July.
Let’s go to our hypergrowth expert Luke Lango and Monday’s Daily Notes in Innovation Investor:
The Fed chatter is turning friendlier.
On Friday, Fed Governor Christopher Waller said a rate cut could come as soon as July, provided inflation stays soft.
[On Monday], Governor Michelle Bowman echoed those comments, saying she’d support a cut in July if inflation data cooperates.
Rate cut odds for July have spiked—from 5% last week to 25% today. And the market is now pricing in almost three cuts by January 2026. Rate cuts are coming, folks.
That’s fuel for the economy and stocks.
But then, yesterday, in remarks before Congress, Fed Chair Jay Powell went in the opposite direction. Here’s CNBC:
[Powell] emphasized the central bank’s commitment to keeping inflation in check, saying he expects policymakers to stay on hold until they have a better handle on the impact tariffs will have on prices…
He noted that inflation is still above the Fed’s 2% target, with the impact that President Donald Trump’s tariffs will have still unclear.
“Policy changes continue to evolve, and their effects on the economy remain uncertain,” Powell said. “The effects of tariffs will depend, among other things, on their ultimate level.”
This tension between Powell and his colleagues isn’t a contradiction – it’s a reflection of the Fed’s current bind
The Fed is hopeful about disinflation…but cautious due to the various unknowns.
So, you have the Waller/Bowman camp warming to cuts due to the softer inflation prints (this is why – as Luke noted – July rate-cut odds jumped from just 5% last week to 25%) …
But you also have the Powell camp slow-walking cuts due to forward-looking inflation concerns (which is why those same rate-cut odds fell from 25% to 20% after Powell’s testimony).
Here’s Powell from his remarks to Congress:
If you just look at the basic data and don’t look at the forecast, you would say that we would’ve continued cutting.
The difference, of course, is at this time all forecasters are expecting pretty soon that some significant inflation will show up from tariffs. And we can’t just ignore that.
Here’s the most likely takeaway for now…
Rate cuts could happen soon, but the path is conditional.
If this Friday’s PCE report confirms the disinflation trend, and we get through July 8 without tariffs exploding higher, then the door to a summer cut remains open, and a September cut is likely.
But if inflation data surprises to the upside, or the reintroduction of Liberation Day tariffs muddies the water, Wall Street’s recent bias toward more rate cuts will be proved wrong yet again…and we should brace ourselves for a new round of volatility.
But more volatility would bring a new bevy of trading opportunities
In yesterday’s Digest, I highlighted how today’s market isn’t built for passive investing alone.
Greater volatility is the new norm… AI is amplifying market moves for an increasing number of stocks… and buy-and-hold is facing headwinds (the S&P is up less than 4% on the year).
In this environment, trading is becoming more essential than optional. So, we’re going to be highlighting different ways to trade over the coming weeks to help demystify how it works.
In yesterday’s Digest, we profiled a new trading tool from our corporate partner TradeSmith. It scans 120 million data points to identify prime trading moments – “profit windows.”
This morning, TradeSmith’s CEO Keith Kaplan went live to demonstrate how the tool works. He provided back-tests of the results (like 89% in 1 day… 339% in 18 days… even 776% in 17 days). He also gave away the names and tickers of three new opportunities for July 1 that could each shoot up 100% or more in days.
If you missed it, you can check it out for free right here.
For our second installment of our trading series, let’s turn to Luke Lango
On Monday, one of Luke’s trades in Breakout Trader – Kratos Defense & Security Solutions Inc. – pushed above the 200%-return milestone (they opened it in spring of 2023).
What’s the trading strategy behind this gain?
In my opinion, it’s one of the best medium-term, limited-stress systems out there.
It relies on something called “stage analysis,” which you can begin implementing in your own portfolio today.
The underlying idea is simple…
At any given point in time, an asset is either going up, down, or sideways.
To that end, it’s always in one of four unique stages: 1) going sideways at a bottom, 2) going up, 3) going sideways at a top, or 4) going down.
Stage analysis is the science behind determining which stage a stock is in, and then only investing in a stock when it’s surging in Stage 2.
This puts all the emphasis on price, which is the one variable that directly impacts your wealth.
Here’s Luke’s take:
…The only thing that will make a difference to your portfolio is whether the stocks you own rise in value while you own them.
Let’s say you found a truly atrocious company – we’re talking the opposite of a blue chip. It’s hemorrhaging cash, has awful management, and is in a dying industry.
But what if its stock price had just broken out and, hypothetically, was on its way to doubling from $5 to $10? Would any of those negative characteristics matter to you?
If what you care about is your personal wealth, they shouldn’t. Why would they?
All that would matter is that the stock is doubling while you’re invested…
When it comes to wealth-building, the only thing that truly matters is whether the share price moves in the direction you want during the period you own the stock.
This type of trading system doesn’t incorporate any fundamental analysis
Stocks aren’t buy-and-hold heirlooms for the long haul. Instead, they’re nothing more than a tool – only as useful as their ability to generate wealth.
So, bullish momentum is what matters for this style of trading.
Circling back to KTOS, as you can see below, Luke’s subscribers jumped in very early in its Stage-2 breakout (following its Stage-1 consolidation).
Yes, KTOS has experienced plenty of volatility since, but its Stage-2 breakout channel has remained intact. So, Luke and his subscribers have remained in the trade, resulting in that push beyond 200% I highlighted a moment ago.
Now, why has KTOS been surging?
In short, tailwinds in hypersonic tech and military drones. The company has won major government contracts and ramped up production. Add in growing defense spending, insider buying, and even index inclusion, and it’s no wonder this stock’s been climbing.
But for Luke’s purposes, asking “why?” is irrelevant…
If KTOS was selling toilet paper – yet its stock was breaking out in the same way – it would be on Luke’s radar.
Bottom line: With this style of trading, price is truth.
Overall, this type of trading is good if you don’t want to be too active, reacting to every market dip and surge
You’re generally hands-off.
As long as the trade remains in its Stage-2 breakout, you don’t have to do much.
As for trade length, you can be in a position anywhere from a few days to a couple years in KTOS’s case. The timing relates 100% to bullish price momentum.
From a “stress” perspective, stage analysis enables you to pullback and “see” the breakout, which helps provide greater peace about your exit.
Tip: Be sure to factor in a stock’s inherent volatility when thinking about stop-losses. A stop-loss that’s too tight relative to a stock’s natural volatility means you’ll sell too soon. One that’s too loose means you risk accepting a greater drawdown than you want.
This is why when Luke makes a new trade recommendation, he highlights the stock’s standard deviation. This plays a role in your stop-loss, which influences your expectation of volatility, and by extension, your position size.
Getting this right (or wrong) has a huge impact on your calm (or stress) when a trade is live.
Overall, stage analysis is a great trading system when you want to be involved – but not feel overly burdened by the need to check in too often. It’s also fantastic for visual traders.
More on our trading series to come when we highlight Jonathan Rose.
Two stocks on Luke’s radar today
We’ll dive into this in greater detail in a future Digest, but let’s put this on your radar…
Robots/humanoids are coming… it’s going to be huge… now is the time to get in before the masses.
There are many ways to do this which we’ve been profiling in recent months, but Luke just highlighted another.
Let’s return to his Innovation Investor Daily Notes:
We are very bullish on the emergence of AI-powered humanoid robots over the next several years. We think they’ll go from being nowhere today to being everywhere in factories by 2030 and everywhere in homes and on streets by 2035.
We are in the first inning of hypergrowth for humanoid robots. If so, that means we are in the first inning of hypergrowth for demand of rare earth magnets, too.
That’s because the most mission critical physical component of a humanoid robot is a motor or actuator.
These robots will have dozens of motors across their bodies that convert electrical energy into mechanical energy.
Magnets are key to that conversion.
We’re running long so I’ll jump to the bottom line…
As we’ve covered in the Digest, China controls about 90% of the rare earth element (magnet) market. Obviously, that could prove problematic given strained relations between the U.S. and China, as well as the Trump’s administration Made-in-America agenda.
So, if you’re looking to invest in a U.S.-based rare earth play, Luke points toward MP Materials (MP) and USA Rare Earths (USAR).
Luke calls MP the “big dog in the U.S.” and USAR “a more speculative startup that is trying to cut out a niche for itself.”
More on this to come, but if you want to get a jump on this for your research, here’s your heads-up.
If you want Luke’s latest updates on these stocks and his official recommendations in Innovation Investor, click here to learn more.
Have a good evening,
Jeff Remsburg
