Donald Trump cancels tariffs as easily as he threatens to impose them. Markets swing from hot to cold. Investors are shifting from a "sell America" stance to TACO, or "Trump Always Chickens Out." Experienced traders know this, so the S&P 500's drop in response to an escalation of the US-Europe trade dispute did not faze them. On the contrary, it presented a buying opportunity, and participants stepped in.
Putting geopolitical noise aside, there is little reason to doubt the uptrend in the broad equity index. The US economy is as strong as a bull and can withstand a federal funds rate around 3.75%, which the Fed is likely to begin cutting in June. Wall Street analysts have raised corporate earnings forecasts to 14% for 2026. Follow the link for more details.
The US stock market is recovering after a period of elevated volatility caused by geopolitical and trade risks. Major indices, including the Nasdaq 100, the S&P 500, and the Dow Jones, moved higher as tensions between the US and the EU abated and fears of a widening trade war eased. The Nasdaq 100 was among the leaders of the recovery.
Data released yesterday confirmed the resilience of the US economy. Revised gross domestic product (GDP) for the third quarter of 2025 rose to 4.4% year-over-year, surpassing initial estimates and market expectations. The US dollar index slipped to 98.55, which is a positive for revenues of US multinational corporations, particularly in the tech sector. Follow the link for more details.
With the global economy in the largest central bank easing cycle since 1998, geopolitical risks need to be very material to knock the S&P 500 off course. Trump's tariff threats to Europe followed by a quick retreat sounded like kid's play to traders. The sell?off was quickly bought, and strong macro data allowed the stock market rally to continue.
US GDP accelerated from 3.8% to 4.4% in Q3, rather than the initial reading of 4.3%. Despite the shutdown, the Atlanta Fed's leading indicator points to GDP accelerating to 5.4% in October-December. Initial jobless claims rose to 200,000, missing forecasts but consistent with a stabilizing labor market. Follow the link for more details.
