The bull boat finally gets a lot more crowded/Balancing the budget bill with tariffs/Oil/Other

There has been one thing missing from this rally off the April lows and that's been much bullish exuberance, which itself is a positive from a contrarian perspective, something I mentioned a few weeks ago. That though has changed as all the sentiment indicators I look at are now pretty bulled up. Nothing extreme but now getting stretched.

Investors Intelligence jumped to 51 from 38.8 while Bears fell to 21.6 from 28.6, both rather large one week moves for each in this survey. The Bull/Bear spread in the weekly AAII survey moved to the highest since January as Bulls rose 9.9 pts w/o/w to 45, the most since mid December. This surpassed Bears which came in at 33.1, down 7.2 pts w/o/w to the least since late January.

The National Association of Active Investment Managers Exposure Index popped to 99.3 with it rarely going above 100. That's the highest print for this gauge since July 2024. The CNN Fear/Greed index moved into the 'Extreme Greed' lane at 78 vs 63 one week ago. Lastly, the Citi Panic/Euphoria index is back in Euphoria. https://www.cnn.com/markets/fear-and-greed

Bottom line, as stated there is nothing extreme yet but we're now finally getting giddy and from a contrarian view, it's worth taking note in the short term.

AAII Bulls

NAAIM Exposure Index

Citi Panic/Euphoria Index

If there is one thing the Vietnam trade deal did (outside of raise the cost of our imports from them to 30% which includes the base line 10%), it raises the chances that instead of a fresh 10% across the board tariff, the blended rate will likely be higher. To put numbers around this again, we import about $3.3 Trillion of goods so a 10% blanket tariff would cost $330b. If the average number is going to be something like 15% instead, then we're talking about $500b. For perspective, the US government takes in about $525b of corporate income taxes so we're essentially doubling the rate from the current 21%. As a fan of lower taxes, particularly the 2017 cut in the corporate rate to 21%, I hope you can understand my displeasure with tariffs. Yes, exporters to us will eat some of it but with the weaker dollar, it won't be much.

For those who think we won't see any noticeable rise in tariff induced consumer inflation because it hasn't shown up in yet in CPI, even though it has showed up in import prices and core PPI, a story in Nikkei News last week said "Nearly three months since the US imposed a 25% tariff on automobile imports, Japanese carmakers are starting to raise prices and preparing to boost American production. Toyota has decided to increase vehicle sales prices in the US by an average of $270 from July. The company said it made the decision based on the announcements of price hikes by a number of competitors, as well as market trends."