It was a $2.5 trillion rally that lasted just 7 minutes – amidst all the global gloom and doom – the US stock markets rallied briefly on Monday. And all because of a rumour that Trump may for now decide not to impose reciprocal tariffs. Investors quickly discounted a false report about US President Donald Trump’s supposed 90-day tariff pause and adjusted their trading accordingly.
Subsequently, trading activity stabilised, with investors neither aggressively selling nor buying. The main US indices fluctuated between positive and negative territory throughout Monday’s session, reflecting market uncertainty.
This incident highlighted the stark contrast in potential outcomes of Trump’s international trade policies. Maintaining current tariffs could potentially trigger economic contraction and push the S&P 500 into bearish territory. Conversely, removing them could stimulate economic growth and drive stocks to new heights.
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“There’s no question that if Trump woke up tomorrow and said, ‘you know what? I’m not doing this’ the markets would just move back to a new high,” said Ross Gerber, chief executive officer of Gerber Kawasaki Wealth and Investment Management according to a Bloomberg report
Monday’s brief rally demonstrated that merely suggesting a tariff implementation delay resulted in a $2.5 trillion US stock market rally.. Investors who withdrew funds during the S&P 500’s 10% decline over two days last week faced the risk of missing such significant market recoveries.
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However, maintaining tariffs presented a different scenario. Before any possibility of relief emerged, markets were heading towards bear territory, making it challenging to anticipate policy changes.
The situation was further complicated by inconsistent government communications. Various cabinet members suggested ongoing negotiations with 50 to 70 countries, while White House trade adviser Peter Navarro maintained nothing was negotiable.
Trump’s own communications added to the uncertainty.
He mentioned on Monday afternoon that permanent tariffs could coexist with negotiations, as certain requirements extend beyond tariff considerations.
The market confusion has left traders perplexed, the Bloomberg report said. Portfolio management has become challenging, as both a panic-driven decline and policy-driven upswing seem equally possible. This situation suggests a need for adjustments in investment behaviour.
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