As we mentioned in our commentary regarding the tariffs last week, our view is that the market is continuing to react to any update relating to the trade war. During these times of heightened uncertainty and volatility, it is important to remember that volatility can cut both ways. Today, we saw volatility expressed to the upside as the developments unfolded. We discuss this below.
We do not believe that the volatility in markets is over, but as more clarity comes into the picture, we should see volatility subside as the true economic impact of the remaining tariffs can be measured. Our viewpoint continues to be that the tariffs announced last week serve as a starting point to more refinement via negotiation in the coming weeks and months. Delays and refinement/reduction of the tariffs are being welcomed by the market. In recent days, many strategists have commented on the near-term damage that the tariffs could cause if they remain in place. Today, many of those strategists have walked back on their more severe forecasts given the announcement of a 90-day delay.
- Markets are soaring off news that President Trump is pausing tariffs for 90 days on non-retaliating countries.
- At the same time, China is now seeing tariffs up to 125% on their goods.
- This news comes as a welcome respite from the recent trade war escalation.
- The delay does another thing—it allows for more time to negotiate. This delays any immediate stress on companies who may have been dealing with significant supply chain disruptions.
- U.S. stock markets are responding with significant moves to the upside, with the S&P 500 index rising over 9% at the time of this writing.
Comments from Treasury Secretary Scott Bessent are also adding to the bullish sentiment on potential de-escalation. In an interview today, he noted:
- Raising duties on China to 125% was due to their escalation.
- He is committed to working on a solution with our trading partners and is actively involved in direct negotiations.
- The administration is choosing to pause now due to newly found “negotiating leverage.”
- Finally, the treasury secretary says that the initial tariff package was the “maximum level,” a statement that seems to be providing the biggest lift to markets.
Days like today remind us of the importance of staying in the market through times of stress. We have written in the past about how missing the top-performing market days can have a significant impact on long-term returns—today is likely one of those days.
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