Trade Truce and Lower Inflation: Time to Double Down on These Winners!

The U.S.-China trade deal framework, announced in June 2025, is a game-changer for investors. After years of tariff wars and supply chain chaos, this agreement eases tensions—temporarily—but creates a critical window to position portfolios for growth. With inflation cooling and the Fed primed to cut rates, it's time to overweight equities in sectors like industrials, tech, and commodities while underweighting bonds. Here's how to play it—and where to watch out.

The Trade Deal: A Fragile Truce with Big Implications

The framework keeps U.S. tariffs on Chinese goods at 30% and China's retaliatory duties at 10%, but it's a critical step toward stability. China agreed to resume rare earth exports—vital for tech and electric vehicles—while the U.S. relented on semiconductor restrictions. This removes a key inflationary pressure: supply chain bottlenecks.

Why it matters: Reduced trade friction lowers input costs for companies, boosting margins. The May CPI data—up just 0.1% month-over-month and 2.4% annually—reflects this. With inflation expectations now anchored, the Fed could cut rates by year-end, juicing equities.

Buy These Sectors Now

1. Industrials: The Supply Chain Recovery Play

Industrials are the first to benefit from smoother trade. Companies like Boeing (BA) and Caterpillar (CAT) rely on Chinese components. With rare earths flowing freely again, production bottlenecks ease, and costs drop.

Cramer's Call: Buy industrials with global supply chains. These stocks could surge if the Fed cuts rates, as lower borrowing costs boost capital spending.

2. Tech: Tesla's Turnaround and the Semiconductor Rebound

Tesla (TSLA) is a must-own here. The trade deal's semiconductor concessions reduce chip shortages, allowing Tesla to ramp up production of its Cybertruck and Model Y. Meanwhile, rare earth access lowers battery costs—a direct earnings boost.

Beyond Tesla: Semiconductor firms like Intel (INTC) and ASML Holding (ASML) will thrive as U.S.-China tech trade normalizes.

3. Commodities: Oil and Gold—But Watch the Fed

Oil: Lower inflation and Fed rate cuts mean lower demand for oil as economic growth stabilizes. But don't go all-in here—the trade deal's 90-day window could still blow up.

Gold: A classic safe haven, but with inflation tame, gold's gains may be muted. Buy a small position as insurance against trade deal volatility.

The Red Flags: Bonds and the Fiscal Time Bomb

While equities shine, avoid bonds—especially Treasuries. The Fed's rate-cut expectations will crush yields, making bonds a losing proposition.

The bigger risk: The U.S. fiscal deficit. With spending soaring and revenue stagnant, the U.S. must issue $3.2 trillion in new debt by 2026. This could spike borrowing costs long-term—even if the Fed cuts rates now.

Final Playbook for 2025

• Overweight equities: Focus on industrials (BA, CAT), tech (TSLA, INTC), and commodity producers with pricing power.
• Underweight bonds: Skip Treasuries; stick to short-term corporate debt if you must.
• Hedge with gold: A 5–10% allocation to gold ETFs (GLD) to guard against trade deal reversals.

The trade truce isn't perfect—nothing with China ever is—but it's a critical step toward lower inflation and higher earnings. This is your moment to act bold, be greedy, and load up on stocks poised to outperform.

Action Alert: The next 90 days will test this trade deal. If the U.S. and China fail to extend beyond July, volatility will spike. Stay nimble—but for now, buy the dip in industrials and tech.*

Data as of June 2025. Past performance does not guarantee future results. Consult your financial advisor before making investment decisions.