On Monday, a sense of relief seemed to wash over the stock market as concerns regarding a budding trade conflict between the US and China started to abate. Keith Lerner, co-Chief Investment Officer at Truist, characterized the surge in stock as a response to a seeming break in the tension between these trading juggernauts. According to him, this calmer period significantly exceeded market projections. ‘The markets pivot on anticipations,’ noted Lerner, ‘and in this context, the near-term developments have taken a positive turn. Particularly given that the wider market, or to put it differently, Wall Street, had not anticipated this turn of events.’
By the middle of the morning, the S&P 500 experienced a jump of nearly 3%. The Dow Jones Industrial Average also had a strong showing, with gains surging by more than 2%, equivalent to roughly 1,000 points. In the vanguard of this leap was the Nasdaq Composite, notorious for its focus on technology stocks, registering an increase of 3.6%.
During the weekend, intensive discussions between the US and China culminated in a decision to put most tariffs – imposed by both nations on each other’s merchandise – on hold for a period of 90 days. This break effectively cuts down US tariffs on Chinese goods, initially as high as 145%, to a more palatable 30%. In return, China reduced its counter-tariffs on US goods too, lowering the rate from 125% to a mere 10%.
Scott Bessent, the Treasury Secretary, expressed the perspective of both nations in a series of interviews on Monday, reassuring that there is ‘no interest from either party for a trade uncoupling’. Bessent highlighted optimism for extension of the 90-day break, promising, ‘If both sides continue to engage, participate and foster positive discourse, then we shall advance together.’
The accouncement spurred a bullish run in the markets as a significant number of Wall Street analysts had been emphasizing for several weeks that any news concerning tariff agreements between the US and various countries could act as a key impetus for the market. As Senior Investment Strategist at Charles Schwab, Kevin Gordon, pointed out, ‘This development can be construed as an especially positive driver in terms of securing a notable pause with an important trade ally.’
The period before and after the initial tariff proclamation by President Trump on April 2 saw certain stocks experiencing a significant plummet. However, these same stocks were at the forefront of market advances on Monday. The small-cap Russell 2000 index marked a rise of approximately 3.6%.
The next step, as per Gordon, is to keep an attentive eye on whether these trends continue and if the market retains its momentum. ‘At this juncture,’ Gordon said, ‘once the major fall has occurred and we begin to see expansion, it becomes crucial for those underperformers to regain traction for the upturn to have any kind of longevity.’
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