Stockmarkets around the world have surged and bond yields have come down as global investors enthusiastically welcomed a 90 day pause in US reciprocal tariffs to allow for deal negotiations.
The market had seemingly overlooked the fact that striking a deal can involve making unreasonable demands to begin a negotiation process before softening a position. Investors rapidly reversed course when the announcement came yesterday evening.
The Nasdaq rose a remarkable 12% while the S&P 500 climbed 9.5%. Major tech names climbed as much as 18%.
European and Asian markets had closed by the time of the announcement, but all saw strong rallies this morning.
Equities are not out of the woods yet though, with tariffs on China still in place and no certainty that negotiations with other nations will result in deals.
AJ Bell investment director Russ Mould said: “If you felt a bit of a breeze around 6.30pm UK time last night it was probably the cumulative effect of countless global investors breathing a massive sigh of relief.
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“News that the particularly punishing ‘reciprocal’ tariffs introduced by the Trump administration would be put on hold saw substantial gains in the US and across Asia and that pattern is being repeated in Europe this morning. Tellingly one of the biggest gainers was shipping giant Maersk.
“The one laggard is the Chinese market where escalation remains the order of the day with China introducing 84% retaliatory tariffs after the US levy on Chinese imports was increased to 125%.
“A fortnight ago, the prospect of the world’s two largest economies engaging in an all-out trade war would have been cause for significant alarm, but relative to the situation before president Donald Trump hit the pause button on wider tariffs the market’s cheer is understandable.
“Notably yields on long-term US government debt, a surge in which may have helped concentrate minds in the White House, remain elevated even if they have come back from their highs.”
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Ian Futcher, financial planner at Quilter, added: “Recent swings in global equity markets following the US decision to pause tariffs for most countries—but not China—highlight how sensitive investors are to geopolitical developments.
“While it’s encouraging to see signs of diplomatic flexibility, the persistence of elevated tariffs on Chinese goods still poses risks to corporate profits and broader economic stability.
“For investors, this is a reminder that market sentiment can shift quickly, and that staying invested through uncertainty can often prove more rewarding than trying to second-guess the news cycle,’ Futcher continued.
“Investors should remain calm amid volatility and ensure their portfolios are diversified across regions and asset classes. Knee-jerk reactions rarely serve long-term goals. If anything, this period demonstrates why remaining invested and staying the course can often yield better outcomes than trying to time the market.
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