Good morning,
Equity markets are rallying sharply this morning, with Futures up more than 3%, following the weekend’s trade détente between the United States and China. Everyone seems to love curbs on tariffs that did not exist 6-weeks ago. The suspension of most recently implemented tariffs has brought trade policy expectations closer to the more optimistic outlook seen in early April. For many investors, the past six weeks now feels like just a nightmare.
Technology stocks are poised to lead the advance, signaling a potential rotation back into U.S. assets. The Nasdaq 100 is approaching bull market territory, with members of the “Magnificent Seven,” such as Tesla, Amazon, and Apple, all trading more than 6% higher in pre-market activity. Apple is also benefiting from a Wall Street Journal report suggesting a potential price increase in its upcoming iPhone lineup. Consumer-facing sectors, including airlines and cruise lines, are also showing strength. Meanwhile, the VIX has retreated to approximately 20, reflecting a decline in market volatility.
Markets are responding positively to the reduction in uncertainty—historically, the market’s kryptonite. The recent news is providing investors with tangible developments to support forward-looking price discovery. We’ll see how much repair the next few days will have on the market’s recently bearish signals.
Looking ahead, the week includes key corporate earnings, such as Walmart, along with important economic data releases, including the Consumer Price Index (CPI), Producer Price Index (PPI), and Retail Sales. Nevertheless, trade developments are likely to remain the dominant market catalyst in the near term.
Be well,
Mike