Wall Street is "holding its breath," but it is a calculated "holding of breath." Investors are betting on trade negotiations and the upcoming earnings season.

Still, don't let the temporary green mislead you. Behind that is a tense game ongoing between the White House and the Federal Reserve (Fed), with the global financial market hanging on every move.

On one side are unpredictable negotiating blows, on the other is the calculated patience of the Fed, while investors are "holding their breath" waiting for the verdict from the upcoming earnings season.

Wall Street remains calm amid the tariff storm

The tariff storm continues to escalate. Just one day after notifying 14 trading partners, Trump continued to increase pressure by officially announcing a 50% tariff on copper and stating that he would target two vital sectors: semiconductors and pharmaceuticals. He also hinted that "at least 7 more announcements" will be made today.

However, unlike the panic sell-off on Monday, the market's response this time is quite moderate thanks to experience and expectations. Investors seem to be "reading" what has happened, viewing this as the opening shots to gain an advantage at the negotiating table rather than a predetermined sentence.

The extension of the tariff deadline to August 1 has given both sides a precious amount of time. European Commission President Ursula von der Leyen confirmed that the EU is "working closely" with the Trump administration to seek an agreement, while still preparing for all scenarios.

More importantly, according to Mr. Bramwell, the market is facing another "test" to cling to.

"They will only react if they see the impact of tariffs clearly reflected in the Q2 earnings report next week. But if profits continue to improve, the market will have more reasons to patiently await the end of negotiations," he said. This is Wall Street's big bet: whether the internal health of companies is strong enough to withstand the policy storm.

Caught between the "crossfire" of inflation and growth

The Fed is facing its own puzzling dilemma. The tariff policy puts the Fed in a bind between two crossfires: the risk of rising inflation due to increased import prices and the risk of slowing economic growth due to supply chain disruptions and rising business costs.

Due to this uncertainty, the Fed remains extremely cautious. All attention is focused on the minutes of the June meeting, expected to be released at 2 PM on July 9 (1 AM on July 10 Vietnam time). Traders will dissect each word to find clues about when the Fed might resume its rate-cutting cycle.

The likelihood of the Fed acting in July is almost zero, but CME Group's FedWatch tool presents a different picture for the medium term, showing that the probability of a rate cut in September is currently around 63%. This figure speaks volumes, indicating that the market still believes the Fed will eventually have to act to support the economy if trade tensions do not "cool down."

Personal stories within the big picture

After the S&P 500 and Nasdaq just reached new highs last week thanks to positive job reports, the focus of this week will shift to unemployment claims data set to be released on July 10.

This indicator is important to assess whether the labor market remains strong. Meanwhile, the Dow Jones index is currently just 1.9% away from its historical peak - a very close but challenging distance.

From now until the deadline of August 1, the market will be continuously challenged. The "game" between President Trump's tariffs and the Fed still has many unpredictable moves. But one thing is certain: the final outcome will not only be determined by tweets or speeches but by the actual numbers in corporate earnings reports and on the payroll of American workers.

Wall Street is "holding its breath," but it is a calculated "holding of breath."