The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Tariff Pillow talk.
News of a trade deal with the UK broke last night and some details, along with a photo op, came out of the White House today. Stocks loved the news and while the S&P 500 opened +35, it really loved the photo op and extemporaneous comments by the President. The index climbed to +90 shortly after the event, buoyed by comments from Trump that suggested China talks would be positive. The bullishness lasted for most of the afternoon although there was a bit of fading into the close. Yields climbed significantly across the curve and markets currently price 68 bips of cuts in 2025.
The details of the UK trade deal are lacking and the best that can be said is that an agreed-upon framework was announced. Whether the juice was worth the squeeze will be a topic for economic historians. For the moment, investors like the fact that this is the first major step toward repairing the damage caused, and ongoing, from Liberation Day.
The celebrations from the UK deal both in the White House and on Wall Street are nice but markets continue to trade on hopes and wishes for the time being. The actual economic data, especially if it suggests a recession, is what’s going to matter most.
The bottom line is that all the gains from the April 7th lows, that’s 17% btw, will go bye-bye if we fall into a recession.
The market will rally further if the risk of recession fades and growth accelerates.
The uncertainty due to the tariffs has made identifying which outcome lays ahead, an impossible task.
I don’t know when data arrives that allows the market to choose an outcome and price accordingly. It will arrive though and I think the bulls are more at-risk than the bears.
See you tomorrow.
-Mike
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