Insights 
VT 
Goldman Sachs reports that consumer costs are expected to increase by 70% through the autumn. Their early analysis shows that tariffs are affecting various economic players differently.
According to the data from June 2025, foreign exporters have absorbed 14% of US tariffs. Meanwhile, American companies have taken on 64%, and consumers are bearing 22% of the tariff costs.
Impact Of Tariffs
Additionally, protected domestic firms have raised their prices. JP Morgan indicates that the impact of tariffs is beginning to manifest in the economy.
They observe that goods prices are on the rise. There’s also a noted decline in consumption, suggesting economic changes are underway.
We are seeing that US companies are bearing the brunt of tariff costs, absorbing 64% of the hit according to data from June 2025. With consumer costs expected to jump another 70% into the autumn, corporate profit margins are under serious threat. This suggests a bearish outlook for broad market indices like the S&P 500 in the coming weeks.
This environment of rising prices and slowing consumption points directly to increased market volatility. The CBOE Volatility Index (VIX) has already crept up to 21 this past week, a significant move from the low teens we saw in the spring. We should look at buying VIX call options or VIX futures to hedge against, or profit from, a potential spike in market fear.
Federal Reserve Position
The Federal Reserve is now in a difficult position, caught between fighting inflation and preventing a recession. July’s CPI data showed inflation stubbornly high at 4.9%, making a rate cut unlikely even as consumption slows. This uncertainty can be played by trading options on SOFR futures, betting on continued turbulence in short-term rate expectations.
Looking at specific sectors, retail and consumer discretionary stocks look particularly vulnerable. Major retailers are highly exposed to both rising import costs and weakening consumer demand. We should consider buying put options on retail-focused ETFs, such as the XRT, as a direct play on this trend.
Historically, this kind of economic uncertainty has driven capital towards safe-haven assets. Looking back at the stagflation of the 1970s, gold was a primary beneficiary of the flight to safety. Gold futures have already rallied past the $2,600 per ounce mark in early August, and we expect this upward trend to continue.
The slowing US economy could also put pressure on the US Dollar, although high inflation may offer some support. The US Dollar Index (DXY) has been trading sideways in a tight range, reflecting this indecision in the market. This suggests opportunities in currency options that profit from a significant breakout in either direction for pairs like EUR/USD.
