Markets have surged after Donald Trump announced a 90-day pause on higher tariff rates.
Instead, the US president has implemented a universal 10% tariff, with the exception of China, who have been hit with 125% tariffs.
After days of sharp losses, the S&P 500 rose 9.52% to record its best single day trading since 2008. In Asia, the Nikkei jumped over 8%, while the Hang Seng Index was up 3.5% as the market breathed a sigh of relief.
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“It appears Donald Trump cares about what markets think after all,” Marcus Brookes, chief investment officer at Quilter Investors said.
Brookes said the president likely stepped in before he would have had his hand forced by the Federal Reserve, a “humiliation he clearly wants to avoid”.
“Even so, the damage is arguably done for the US. Many consumers and businesses cannot plan with any sort of confidence just now and may see a recession hit regardless. Spending and investment could be pared back and would be completely counter to everything Trump said he wanted to achieve.
“What happens after this, or during for that matter, is anyone’s guess and as such investors shouldn’t get used to the sugar high markets have reacted with. These sorts of market issues require calm heads and cool hands, so for investors, patience is key.
“Drip feeding money into investments is the best way to ride out this period of volatility and ensuring your portfolio is in good shape once things settle down again.”
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Jochen Stanzl, chief market analyst at CMC Markets, said that further volatility is expected despite the pause, with Trump playing ‘cat and mouse’ with the markets.
“The announced pause on reciprocal tariffs reduces the risk of recession, prompting markets to rise sharply once again. However, the economy thrives on trust, and over the past weeks, the U.S. President has shattered much of this confidence. While hope is back in the air, caution is still warranted. Universal tariffs of ten percent remain in place, which is enough to push the global economy toward the brink.
“Trump continues to view tariffs as a bargaining chip and does not intend to deliberately destroy global trade—despite fears that his approach could lead to that outcome. A palpable sense of relief is washing over trading floors worldwide. In stock markets, all movements are relative: rising prices indicate that the situation is not as dire as initially feared, but they do not signify that everything has returned to normal.”