The U.S. stock market soared, with major indices posting single-day gains of historic magnitude following President Donald Trump’s announcement that he was suspending most of the tariffs he planned to impose later this month. The abrupt policy change offered a rush of investor relief — long starved for optimism as big trade gains were slowly choked to death by fears.
Some highlights:
Market Rally:
Dow Jones Industrial Average, S&P 500 and Nasdaq saw massive gains. In particular, the S&P 500 logged its biggest one-day percentage gain since October 2008 the last time many of us saw a real global financial crisis.
Such an enormous rise underscores just how attuned the market is to trade data and how relieved investors had become about a de-escalation of trade frictions.
The affect of a Pause in tariffs
President Trump’s decision to freeze “reciprocal tariffs” on a few hundred countries for ninety days was one of its largest confidence-boost for the markets.
True, but tariffs on China were not halted and in fact also went up. This was key to realize the puzzle of what is happening in trade right now.
The pause, in turn, relieved fears of surging costs and a bottleneck to global supply chains which were squeezing investor nerves.
Sector Performance:
Trade garnered tech stocks, which is particularly exposed to trade related disruptions were up big.
Travel-related stocks like airlines and other travel-heavy sectors also rallied a lot, due to what is optimistic consumer spending as well as business vacation.
Market Sentiment:
The sudden market sentiment flip demonstrates how stock market can get volatile due to trade news.
Although the tariff pause offered some good news to take in, larger trade relations remain very much in question and a fear fires that a future tit-for-tat is looming.
Keep in mind that although the market liked it to death, the magnitude and complexity of trade is still very wide open.
The U.S. stock market smashed records on record-breaking gains in late March in response to Trump’s decision to suspend the tariffs for now, staving off what appeared to be a full-blown trade war. That said though, the situation is fluid and we will see how investors react moving forward.
