What's Driving Markets...
1. Tariff turmoil: The US Court of International Trade blocked most of President Donald Trump’s Liberation Day tariffs, with the administration quickly getting them unblocked on appeal, adding another layer of uncertainty to the trade war. The court’s ruling was that a deficit does not constitute an emergency, given the long-standing trade deficit the US has maintained with the rest of the world. Moreover, given that a tariff is a tax, Congress could not abrogate its taxing power in such a broad manner. Trump had threatened 50% tariffs on the European Union by June 1, only to delay the implementation days later to July 9 as the trading partners agreed to fast-track negotiations. Tariffs, in some form, are likely to stay given the revenues needed to fund extension of tax cuts while appeasing deficit hawks in Congress. But Trump may need to explore an alternative legal standing to his previous use of the International Emergency Economic Powers Act. 

Important Risks: Investing involves risk, including the possible loss of principal. • Fixed income security risks include credit, liquidity, call, duration, and interest-rate risk. As interest rates rise, bond prices generally fall. • Investments in high-yield (“junk”) bonds involve greater risk of price volatility, illiquidity, and default than higher-rated debt securities. • Mortgage-related and asset-backed securities’ risks include credit, interest-rate, prepayment, and extension risk. The value of the underlying real estate of real estate related securities may go down due to various factors, including but not limited to strength of the economy, amount of new construction, laws and regulations, costs of real estate, availability of mortgages, and changes in interest rates. • Loans can be difficult to value and less liquid than other types of debt instruments; they are also subject to nonpayment, collateral, bankruptcy, default, extension, prepayment and insolvency risks. • Foreign investments may be more volatile and less liquid than US investments and are subject to the risk of currency fluctuations and adverse political, economic and regulatory developments. These risks may be greater, and include additional risks, for investments in emerging markets. • The risks associated with mortgage-related and asset-backed securities as well as collateralized loan obligations (CLOs) include credit, interest-rate, prepayment, liquidity, default, and extension risk.

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