The one positive development over the weekend is that Trump relented on tariffs for electronics here. That said, he had to come out to clarify that a bit as they won’t be in the 145% bucket but set to be placed in a different bucket instead. When those tariffs will come about remains to be seen, but Lutnick said it may be “in a month or so”.
In any case, at least one thing is clear. That even with Trump wanting to come down hard on China, there is some line so as to not overstep. Looking at you, Apple.
For now, markets are taking things in stride with some hopeful optimism to start the new week.
S&P 500 futures are up 1% and that follows from the 5.7% gains last week – the most since the end of October last year.
However, there is a big question now posed to risk trades moving forward. Is any rally from here going to be sustainable or are we moving to a new cycle where it is a sell on rallies for risk?
Despite some better news in the past 48 hours, the global economy is still headed towards a major landscape change as Trump tariffs stay the course. Recession risks remain high and it’s still unclear what all of this is going to do to inflation, especially in the US.
The thing about Trump’s tariffs is that it has blown up the idea of markets over the past few years, that is to fade uncertainty because it is always just going to be temporary.
Now, tariffs are threatening to weigh on the global economy for a prolonged period of time with potential for things to get even worse.
That is a key risk to consider and to get a better handle of that, one has to a close watch on broader market sentiment as a whole.
US futures might be up today but long-term Treasury yields are not falling off all too much. 30-year yields are still at 4.85% and 10-year yields are at 4.47% currently. Those are at least 50 bps higher than the lows from last week, so it speaks to the level of caution and unease still prevailing.
But for now, we’re still subject to headline risks for the most part. So, let’s see what the next twist in the tale is going to be.
This article was written by Justin Low at www.forexlive.com.