Stock Market Reactions to US-China Tariff Agreement

It seems the recent rally in the stock market, triggered by the US-China agreement to momentarily lower tariffs, has lost some momentum. Adam Parker, founder of Trivariate Research, mentioned in a Sunday update to clients that the risk-reward ratio for the S&P 500 isn’t very attractive right now. He noted that median growth for the third quarter of 2020, compared to the prior year, registered at 4.7%. For 2024, growth projections stand at about 7.2%, surpassing the long-term average, with a predicted 7% for the third quarter of 2025. “Does this overall make sense? I don’t think so,” he remarked.

The S&P 500 has notably rebounded from its low in April, reaching an acquisition rate of approximately 21.6, according to Factset. This level echoes where the market was trading in late 2024, before the impact of President Trump’s tariff policies. Anthony Saglimbene pointed out in a note to clients on Monday that investors have shifted from a somewhat pessimistic view to a more optimistic one since early April, bridging the gap in perceived opportunities.

The economy has frequently surprised analysts since the onset of the Covid-19 pandemic. Continuous growth could provide stability for the market. Michael Grant, co-investment director at Calamos Investments, shared with CNBC that many economists may be overly negative about economic trends, suggesting a recession this year is not very likely. “Markets seem to be interpreting the expansion of stimulus measures throughout the economy as a whole, with the tariff situation being merely one part of a larger picture,” Grant explained.