Are Animal Spirits Taking Over Wall Street Again?

July 27, 2025 | Season 7 | Episode 29 A major shift in global trade dynamics unfolded today as the United States and European Union reached a preliminary agreement setting a 15% baseline tariff on most European imports—significantly lower than the threatened 30% that loomed without a deal. The implications ripple across multiple sectors, with pharmaceuticals hanging in balance as the largest trade category between these economic powers. The deal reveals striking contrasts across industries. European automobiles face a 15% tariff entering American markets while US vehicles will enjoy a dramatically reduced 2.5% rate entering Europe—completely reversing the previous arrangement that favored European manufacturers. Meanwhile, a massive $750 billion energy purchase commitment from Europe represents a clear win for American energy producers as the continent pivots away from Russian supply dependency. Financial markets responded with cautious optimism, recognizing that while the lower-than-threatened tariff rates provide some certainty, significant questions remain about implementation details. This trade development arrives during a particularly consequential week for investors—the heaviest earnings reporting period for S&P 500 companies coincides with the Federal Reserve"s interest rate decision and Friday"s employment report. Despite markets hovering near all-time highs, concerning signals of market froth have emerged: meme stock activity has resurged, retail trading dominates certain market segments, and margin debt has surpassed $1 trillion for the first time ever. The extreme concentration of market capitalization—with just ten stocks comprising 40% of the S&P 500—presents both opportunity and risk for investors navigating this complex landscape. For those seeking potential value amid the uncertainty, European pharmaceuticals and domestic automakers like General Motors present interesting contrarian opportunities, both sectors trading at substantial discounts to the broader market while generating significant cash flow. As global trade relationships continue evolving under new pressures, investors must carefully weigh economic fundamentals against geopolitical risks in portfolio construction. ** For informational and educational purposes only, not intended as investment advice. Views and opinions are subject to change without notice. For full disclosures, ADVs, and CRS Forms, please visit https://heroldlantern.com/disclosure ** To learn about becoming a Herold & Lantern Investments valued client, please visit https://heroldlantern.com/wealth-advisory-contact-form Follow and Like Us on Youtube, Facebook, Twitter, and LinkedIn | @HeroldLantern