Week 27 delivered a dramatic divergence between soft data and hard data, with US equity indices finishing the holiday-shortened week at or near record highs even as the June labor market report printed one of the weakest payroll gains of the cycle. The S&P 500 closed Thursday July 2 at 7,483.24, up roughly 1.8% for the week, while the Dow Jones Industrial Average notched a fresh all-time high on the same day with a nearly 600-point rally, finishing the week up about 2.0%. The Nasdaq Composite gained approximately 2.1%. The strength was counterintuitive: the same week saw nonfarm payrolls come in at just +57,000 versus +110,000 consensus, the ISM Manufacturing PMI slip to 53.3 from 54.0, and the Pentagon's Chinese Military Companies List compliance deadline pass on June 30, forcing US lobbying firms to drop Alibaba and Tencent as clients. Gold broke a four-week losing streak, silver surged nearly 7%, and our gold and silver miners positions rebounded sharply from oversold levels. Looking ahead to week 28, we are preparing to add a new position in the iShares MSCI Brazil ETF (EWZ) on the strength of a 10.5 P/E multiple and an active central bank easing cycle, and we will open a short call position on Eli Lilly (LLY) to hedge our existing long exposure into the Q2 earnings cycle.
Week 27 Recap
The week was compressed by the July 4 holiday, with US markets closed entirely on Friday July 3 and an early close on Thursday July 2. Despite the shortened trading calendar, the data flow was dense. China NBS Manufacturing PMI on Tuesday June 30 surprised to the upside at 50.3, returning to expansion territory. ISM Manufacturing PMI on Wednesday July 1 slipped to 53.3 from 54.0 in May, modestly below consensus. The headline event was Thursday's June nonfarm payrolls, which printed +57,000 against expectations near +110,000 to +115,000, with April and May payrolls revised down by a combined 74,000. The unemployment rate ticked lower to 4.2% from 4.3%, but only because labor force participation fell. The weak print was interpreted as evidence that the labor market is finally cooling in a way that gives the Federal Reserve room to pause, and risk assets rallied on the implication that a September rate hike is no longer the base case. Treasury yields backed up modestly into Thursday's close, with the 2-year at 4.14% and the 10-year at 4.49%, but both remained well below the highs printed earlier in June.
US Equities and the Rate Path
The S&P 500 closed Thursday July 2 at 7,483.24, essentially flat on the day but up roughly 1.8% for the week. The Dow Jones Industrial Average closed at a record high on July 2, up nearly 600 points or 1.1% on the day and approximately 2.0% for the week, with the cumulative weekly gain of 1,023.96 points ranking among the largest of the year. The Nasdaq Composite gained about 2.1%. The 2-year Treasury yield, which had touched 4.24% intraweek ahead of the payrolls print, settled at 4.14% on Thursday, while the 10-year closed at 4.49%. The CME FedWatch probability of a September rate hike collapsed from approximately 80% prior to the payrolls release to roughly 50% by Thursday's close, and the probability of a July 28-29 hike fell to about 20%. Chair Kevin Warsh's FOMC on June 17 had removed the easing bias and pushed the median 2026 dot to 3.8% from 3.4% in March, with 9 of 18 participants projecting a hike by year-end. The weak payrolls print does not invalidate the hawkish pivot, but it removes the urgency that would have made a July hike plausible. The market is now pricing the next move as a coin flip rather than a certainty, which is a meaningful regime change for risk assets.
Gold and Silver Miners: Rebounding From Technical Damage
The precious metals complex staged a sharp recovery in week 27. Spot gold closed Thursday near $4,182 per ounce, up roughly 2% on the week and snapping a four-week losing streak. Silver was the standout performer, surging approximately 6.7% on the week to close near $62.80 per ounce, with the gold-to-silver ratio compressing back from roughly 70 toward 66. Our iShares Gold Producers UCITS ETF (IAUP.L) and iShares MSCI Global Silver and Metals Miners ETF (SLVP) both rebounded meaningfully from the prior week's technical death cross, with SLVP trading in the $30.92 to $32.82 range. The broader VanEck Gold Miners ETF (GDX) closed around $78.83, still well off its 52-week high of $117.18 but up materially from the prior week's lows. The fundamental setup remains exactly what we want to own miners for: the PBOC extended its gold buying streak to 19 consecutive months even as prices pulled back from January's $5,594 peak, global gold ETFs saw continued inflows after the $7.6 billion exodus in week 25, and miner valuations remain discounted against record free cash flow generation at Newmont (NEM), Agnico Eagle (AEM), and Wheaton Precious Metals (WPM). The payrolls miss shifted real yields lower, which is the single most important macro input for the precious metals complex, and the technical damage from week 26 is now in the process of being repaired.
China Internet: Pentagon Deadline Passes Without Capitulation
The Pentagon's Section 1260H Chinese Military Companies List compliance deadline passed on Tuesday June 30 with no removal of Alibaba or Tencent. The most visible near-term impact was on the lobbying and consultancy side, with multiple US firms dropping both companies as clients to comply with the new contracting restrictions that took effect that day. Alibaba's federal lawsuit seeking removal from the list remains pending, but no injunction was granted ahead of the deadline. Despite the headline flow, both stocks actually rallied during the week. Alibaba (BABA) closed Thursday July 2 at $96.14, up approximately 1.4% from the prior Friday's $94.81 close, with the 52-week low of $91.99 holding as support. Tencent (0700.HK) closed Friday July 3 at HK$431.20, up approximately 4.7% from the prior week's HK$411.80, decisively reclaiming its 52-week low as support. The constructive price action into and through the blacklist deadline suggests that the expected forced passive selling was either absorbed or had already been positioned for in weeks 25 and 26. China's official NBS Manufacturing PMI for June, released Tuesday June 30, rose to 50.3 from 50.0 in May, returning to expansion territory and beating consensus of 50.1. The high-tech equipment manufacturing sub-index climbed to 53.5, signaling that the AI-driven capex cycle remains intact. We view the combination of cleared headline risk and improving macro data as a constructive setup for both positions into Q2 earnings in August.
Eli Lilly: Record Run Into Q2 Print
Eli Lilly (LLY) closed Thursday July 2 at $1,213.91, up $22.17 or 1.86% on the day, with an intraday high of $1,232.00 marking a fresh 52-week high. The week was choppy, the stock had traded as low as $1,173.93 on July 1, but the Thursday rally re-established the uptrend. The fundamental story continues to strengthen. The $50-per-month Medicare pricing structure for Zepbound and the forthcoming orforglipron pill, agreed with the US government in late 2025, dramatically expands the addressable patient population into a cohort of millions of seniors who were previously priced out of the GLP-1 category. Lilly confirmed on June 23 that orforglipron could reach the US market in the second half of 2026, pending FDA approval, and that the European launch is now expected in late 2026 or early 2027, with the Trump administration's reference pricing policy affecting the timing. The Q2 earnings print is scheduled for early August, and consensus expects strong tirzepatide revenue growth with the GLP-1 franchise continuing to take share from Novo Nordisk. The stock's valuation is rich, with the trailing P/E well above 50 and the forward P/E in the mid-40s, which is why we are taking a more defensive posture on the position heading into the print through the short call hedge described in the positioning section below.
Brazil EWZ: The Conservative Valuation Setup
The iShares MSCI Brazil ETF (EWZ) traded around $34.60 during the July 2 session, in the lower half of its 52-week range of $26.30 to $42.02. The fund's P/E ratio sits at 10.50 as of July 2, 2026, dramatically below the S&P 500's elevated multiple and well below emerging market peers such as India and Mexico. Year-to-date the ETF has returned approximately 9.4%, but it remains well off its 52-week high, leaving meaningful room for multiple expansion. The fundamental backdrop is improving on three fronts. First, the Banco Central do Brasil cut the benchmark Selic rate by 25 basis points to 14.25% at its June meeting, the third consecutive cut, with the median forecaster in the Focus survey expecting the Selic to end 2026 at 13.75% and 2027 at 12.00%. Real rates remain among the highest in the world, providing a powerful carry tailwind for both the currency and the equity market. Second, Brazilian commodity exporters Petrobras, Vale, and the major iron ore, soy, and protein complex are benefiting from firm commodity prices even as global growth slows, with the Bovespa's heavy commodity weighting providing a hedge against the stagflation risk that is increasingly priced into developed market equities. Third, the conservative P/E of 10.50 reflects deep skepticism about Brazilian fiscal discipline, but the central bank's inflation-focused credibility under President Lula's current term and the relative political stability following the 2026 electoral cycle suggest that multiple expansion is the more probable path. We will be initiating a position in EWZ during week 28.
Week 28 Outlook
Week 28 is the last full trading week before Q2 earnings season kicks off in earnest on July 9 with PepsiCo, and it is also the week in which the trade policy calendar produces two concrete catalysts. The data calendar is light, but the FOMC minutes on Wednesday July 8 will be parsed for any color on the hawkish pivot, and a fresh batch of Fed speakers will enter the open window before the July 18 pre-meeting blackout. The single most important event of the week, however, is not on the US data calendar at all. It is the USTR public comment period closing on July 6 and the public hearing on July 7, both of which relate to the proposed 12.5% Section 301 tariff on Chinese goods over forced labor allegations. We expect MOFCOM retaliation rhetoric to intensify into the hearing, and any signal that the tariff will be finalized quickly is a negative for Alibaba and Tencent flows. Beyond week 28, the calendar accelerates rapidly: Tuesday July 14 of week 29 is a triple catalyst day, with June CPI, JPMorgan Q2 earnings, and Chair Warsh's first Humphrey-Hawkins testimony all scheduled for the same morning.
Key Events
- Monday, July 6: USTR public comment period closes on the proposed 12.5% Section 301 tariff on China over forced labor. Expect intensified MOFCOM retaliation rhetoric into the Tuesday hearing. Also June ISM Services PMI release at 10:00 a.m. ET (May was 50.8; consensus looks for a modest uptick).
- Tuesday, July 7: USTR public hearing on the proposed 12.5% Section 301 tariff. The most direct trade-policy catalyst of the week for Alibaba, Tencent, and the broader China internet complex. Also US trade balance for May and JOLTS job openings.
- Wednesday, July 8: FOMC minutes from the June 17 meeting, released at 2:00 p.m. ET. Market will look for color on how the committee weighed the hawkish pivot and whether the 9-of-18 hike cohort was a close call. Several Fed speakers also enter the calendar ahead of the July 18 blackout.
- Thursday, July 9: PepsiCo Q2 2026 earnings before the open (consensus EPS $2.19, up 3.3% year-over-year). The unofficial kickoff of Q2 earnings season. Also weekly initial jobless claims for the week ending July 4.
- Friday, July 10: Delta Air Lines Q2 earnings before the open, the first major US airline print of the season. June PPI (producer price index) release at 8:30 a.m. ET, the last read on wholesale inflation before the July 14 CPI.
- Looking ahead to Tuesday, July 14 (week 29): June CPI at 8:30 a.m. ET, JPMorgan Chase Q2 earnings, and Chair Warsh's first Humphrey-Hawkins testimony — a triple-catalyst day that opens week 29.
Four Macro Threads to Watch
First, the Fed reaction function has shifted materially in the favor for risk assets. The June payrolls miss +57,000 versus +110,000 consensus, with April and May revised down by a combined 74,000 is the first hard data point that gives the FOMC cover to wait before hiking. The CME FedWatch probability of a September hike fell from roughly 80% to approximately 50% in the immediate aftermath of the print, and Goldman Sachs Research now expects the first cut to be pushed into June 2027. We do not expect Chair Warsh to abandon the hawkish framing entirely. The June 17 dot plot and the removal of the easing bias were deliberate communications, but the urgency that would have made a July 28-29 hike plausible is now gone. The July 14 CPI print and the Humphrey-Hawkins testimony will be the next major inputs. If June CPI comes in below the May 4.2% headline, the September hike probability will likely fall further, which would be a tailwind for both equity multiples and precious metals.
Second, the US-China trade truce is showing its first real cracks. The Pentagon blacklist of Chinese Military Companies is now in force for Alibaba and Tencent, the Section 301 forced-labor tariff process is moving through USTR with a July 6 comment deadline and July 7 hearing, and the Section 122 15% global tariff is scheduled to sunset on July 24 unless extended. The cumulative effect of these frictions is to keep a bid under gold and silver as a geopolitical hedge, while capping the upside on China internet names even when their fundamental data improves. We continue to expect the November 10 truce framework to hold, but the rhetoric will heat up significantly in week 28, and Alibaba's federal lawsuit against the Pentagon remains a wildcard that could produce a ruling at any time. The proposed 12.5% Section 301 tariff is the most concrete policy risk on the calendar for the China internet complex in July.
Third, the China macro picture is stabilizing at the margin. June NBS Manufacturing PMI returned to expansion at 50.3, the high-tech manufacturing sub-index climbed to 53.5, and the broader non-manufacturing PMI also improved. This is consistent with our view that the PBOC's managed yuan depreciation and the incremental fiscal support are beginning to flow through into the real economy. We still expect an RRR cut or LPR reduction in the third quarter as the consumer-side data remains weak — May retail sales contracted 0.6% year-over-year, the first decline since December 2022 — and Q2 earnings for Alibaba and Tencent in August will be the next major validation point. The combination of cleared Pentagon headline risk, improving manufacturing PMI, and the cheap absolute valuation levels makes us comfortable maintaining and potentially adding to our positions on any pullback.
Fourth, the gold and silver miners setup is now asymmetric to the upside. The week 26 technical damage — including the death cross on the US-listed gold miners benchmark — has been at least partially repaired, with SLVP rebounding off its lows and GDX reclaiming the $78 level. The macro inputs are all turning favorable: real yields are falling on the weak payrolls print, the PBOC gold buying streak has now extended to 19 months, central bank demand is tracking 800 to 850 tonnes for 2026, and J.P. Morgan's house view is for gold to average $6,000 per ounce in Q4 2026 and to rise toward $6,300 by end-2027. The discounted valuations on the major miners — Newmont, Agnico Eagle, and Wheaton Precious Metals — against record free cash flow generation remain the core thesis. We added to our IAUP.L and SLVP positions in week 26 and those positions are now final and complete; we will look to add again on any pullback toward the week 26 lows.
Positioning Into Week 28
We are adding two new strategic actions to the portfolio in week 28. First, we will initiate a position in the iShares MSCI Brazil ETF (EWZ). The thesis is straightforward: a P/E of 10.50 against an easing central bank cycle (Selic cut from 14.50% to 14.25% in June, with the median forecaster expecting 13.75% by year-end and 12.00% by end-2027), a commodity-heavy Bovespa that hedges developed-market stagflation risk, and a 52-week range of $26.30 to $42.02 that leaves meaningful room for multiple expansion from the current $34.60 level. Brazil is one of the few major equity markets where valuations remain genuinely conservative, real rates are among the highest in the world, and the central bank is in an active easing cycle. We will size the initial position at approximately half of our intended full weighting, with the intention to add on any pullback toward the $32 level.
Second, we will open a short call position on Eli Lilly (LLY) as a hedge against our existing long exposure. The stock closed Thursday July 2 at $1,213.91, with a fresh 52-week high of $1,232.00 set intraday. The fundamental thesis on the GLP-1 franchise remains intact, but the valuation is rich — trailing P/E above 50, forward P/E in the mid-40s — and the Q2 earnings print in early August is a binary event that could produce meaningful volatility in either direction. Writing out-of-the-money calls against a portion of the long position locks in the existing gain, generates premium income, and caps upside participation above the strike. We will look to write calls with strikes in the $1,300 to $1,350 range and expirations coinciding with the post-earnings window. This is a hedge, not a directional view — we remain long-term bullish on the GLP-1 franchise and the orforglipron pill launch, but we are taking risk off the table into the print.
We look forward to the July 6 USTR comment deadline, the July 8 FOMC minutes, and the July 9 PepsiCo earnings kickoff to clarify the next direction. The major catalyst day remains July 14, when June CPI, JPMorgan earnings, and Chair Warsh's first Humphrey-Hawkins testimony all converge to set the tone for the back half of July.