Wall Street headed into Friday’s US holiday on track for another solid weekly gain. And more new records.

I get it. The bull case, I mean. Let’s walk through it.

The June jobs report wasn’t anywhere near as good as sundry superficial analyses suggested, but at least it wasn’t a “brake slam” moment like the ADP release. Certainly, it could’ve been worse. And ISM services, despite pointing to a hiring slowdown and pervasive price pressures, nevertheless suggested activity and new orders are expanding in the largest part of the economy.

Meanwhile, Donald Trump’s tax and spending bill was set to become law on time, which is to say on Friday. The legislation’s self-evidently disastrous and if Democrats were anything other than incompetent in the PR department they’d make the public understand it for the budget-busting, hopelessly regressive, asinine P.O.S. that it is. Instead, Hakeem Jeffries gave a long floor speech.

(Newsflash to Democrats: Not one American in 1,000 would recognize Jeffries if they were standing next to him at the grocery store. I realize he’s a good guy, but he’s not a star. I don’t think I’ve ever seen an organization so determined to keep their star players on the bench as Democrats. The excuse used to be, “We can’t play them because they’re too extreme and we’ll lose.” Well, you lost anyway. And an “extremist” just won the New York City mayoral primary. Take a hint. Politics is polarized now. That’s a lamentable reality, but it’s reality all the same.)

That said, Wall Street likes tax cuts. A lot. And Trump’s bill at least delivers in that department.

At the same time, Trump’s plainly learned a lesson from the “Liberation Day” boondoggle. Before you scoff: I’m not saying more trade escalations aren’t on the cards. They are. And yes, I obviously saw his threats to Japan. But Trump’s keen to placate markets. Sure, he’ll throw tantrums occasionally, and we may be coming up on another one next week with the July 9 “deadline” looming and the S&P at all-time highs.

As the simplest of simple figures (above) shows, the rally from the post-“Liberation Day” mini-bear market gives Trump a lot of SPX points to burn if he wants to dial up the pressure on [fill in the blank with today’s trade deficit scapegoat].

And yet, Trump wants more than anything to celebrate “deals” and take credit for records. Any kind of records, but especially stock market records. Remember when America was going to have to live with a little “pain” from the trade war? How long did that last? Long enough for the S&P to dip below 5,000 and 10-year yields to breach 4.50%. I don’t know what America’s “pain” threshold is when it comes to the deleterious impact of archaic mercantilism, but I know what Trump’s pain threshold is for financial markets.

Then there’s the Fed. Simply put: Cuts are coming. Maybe not this month, but certainly in September. The labor market’s wobbly. The spending impulse is waning. Housing’s f–ked (sorry). Consumer sentiment, although better at the margins, is still very subdued and the household psyche’s fragile.

So, cuts. And 50bps by year-end is just table stakes. Barring a significant and sustained inflation uptick that can’t be attributed to one-off price level increases from tariffs, I’d expect 100bps. That’d bring Fed funds to 3.25%/3.50%. Short run neutral might’ve been higher than that as late as last year. But by now, given myriad growth headwinds, it’s probably converged to long run neutral, which the Fed puts at 3% (the long run dot).

Importantly, any recession that comes calling in the back half of 2025 will be relatively shallow. There’s not a lot of leverage on household balance sheets, and corporate balance sheets have virtually never been fitter. The leverage is on the public ledger, and although that’s a risk of its own, it’s not likely to manifest in a private sector recession. Fed cuts when the economy’s not in recession (or not in a deep recession) tend to accrue handsomely to risk assets.

Finally, I don’t see a good case for a dramatic deceleration in corporate profits. Sure, this is a challenging operating environment, but that’s mostly due to pervasive uncertainty. Uncertainty — to the extent it can be measured — peaked in April. “Liberation Day” is as uncertain as macro environments can get outside of apocalyptic events like pandemics.

As the figure above reminds you, US profit margins, at the aggregate level anyway, are still perched near all-time highs. The C-suite could lose 200bps and profitability would still be on par with pre-pandemic records.

Don’t mistake the above for unqualified optimism. You’re never going to get that from me. On anything. Even in a perfect world, things are destined to turn out poorly: We all die.

All I’m saying is that unless you’re i) convinced the US economy’s path to recession will look more like a cliff dive than a grinding slowdown, or ii) determined that record highs and stretched valuations constitute a bear case in and of themselves (and allow me to gently remind you that trying to time the market based purely on valuations is a fool’s errand, particularly in rallies), you’re left with Trump’s reputation for stoking volatility as perhaps the only viable near-term bear narrative.

To be fair to bears, that’s a bit like saying the only danger to this fine china shop is that wild-eyed bull coming through the front door.