Stronger US Stock Markets After Turbulence
The past trading week ended with significant gains for the US stock markets. This recovery suggests a possible stabilization after the markets had previously experienced turbulence due to extreme fluctuations. A key contributor to this development was the announcement by US President Donald Trump to suspend the recently imposed high tariffs for many countries for 90 days. This tariff pause led to a significant increase in stock prices globally.
Background and Reactions
The announcement of the tariff pause on Wednesday evening triggered a rapid rise in the US stock markets. The Dow Jones Industrial Average rose by 7.9% to 40,608 points, the S&P 500 by 9.22% to 5,457 points, and the Nasdaq 100 by 12.2% to 19,145 points. These gains were partly due to the relief among investors that the tariff policy was at least temporarily relaxed.
Asian markets also followed this trend, with the Nikkei 225 gaining 8.6%. However, gains in China and Hong Kong were more subdued as tariffs against China continued to escalate.
Nevertheless, a certain skepticism remains among investors. The uncertainty over the long-term effects of the tariff policy and the growing likelihood of a recession in the US continue to weigh on the markets.
Economic Impacts
The tariff policy could spur inflation in the US, as consumers may hoard goods to protect themselves against rising prices. Additionally, Morningstar has lowered its forecast for real GDP growth in the US for 2025 to 1.2% and increased the probability of a recession to 40 to 50%.
Additional economic challenges arise from rising oil prices due to the tariff changes.
Market Outlook
The closing gains of the week could indicate market stabilization, although uncertainties persist. Investors will closely monitor further developments in tariff policy and the upcoming earnings season of US banks. The earnings season could provide additional clarity on the economic outlook that goes beyond mere profit trends.