President Donald Trump decided to temporarily halt certain tariffs, a move announced through social media, just as major banks were ready to confront analysts about their earnings predictions. The announcement had an immediate effect on the stock markets, with the Nasdaq closing up by 12% and the S&P 500 increasing by more than 9%. Individual stocks also experienced notable gains: Delta Air Lines increased by 23%, Nvidia rose over 18%, and Apple, which had previously seen a substantial decline in value due to concerns about iPhone prices, ended the day 15% higher.
The stock markets surged with optimism post-announcement, influenced further by Treasury Secretary Scott Bessent’s comments that the U.S. was not engaged in a trade war. However, uncertainty still lingers over the next 90 days despite this brief respite. Jake Schurmeier, a portfolio manager at Harbor Capital and a former member of the Federal Reserve Bank of New York’s Markets Group, mentioned that every portfolio manager is attempting to predict future negotiations. He noted this pause gives 90 more days before potential market upheaval reoccurs.
President Trump had previously declared a series of tariffs during a Rose Garden address, which investors had factored into market assessments. Nonetheless, the scope of the tariffs surpassed expectations, causing significant market declines in subsequent trading days. Concerns about a U.S. recession increased, heightened by JPMorgan Chase CEO Jamie Dimon’s assertion that a recession was “a likely outcome.” Trump indicated Dimon’s comments influenced his decision to partially pause the tariffs. Following the decision, markets rallied, with the Nasdaq closing up 12% and the S&P 500 increasing by over 9%.
Michael Orlando, executive director at the J.P. Morgan Center for Commodities and Energy Management, stated that pausing tariffs provided relief from uncertainty, which had affected equity prices. Despite this relief, over the weekend, U.S. Treasuries began appearing less like a safe investment and more risky due to the ongoing tariff situation. Orlando added that the tariff “cooling off” period dispelled concerns about the President’s understanding of trade benefits.
Attention now turns to the potential long-lasting impacts of tariffs and the cost of economic uncertainty. Schurmeier remarked that strategic planning became challenging due to a lack of certainty. He suggested earnings calls between major companies and analysts this week would provide critical insights, especially concerning how they plan to manage tariffs or any disruptions.
The impending challenge is the situation with China, highlighted by President Trump’s decision to increase tariffs on Chinese imports to 125%. This escalation could impact U.S.-China trade relations profoundly, as noted by Idanna Appio, a portfolio manager at First Eagle Investments. Appio expressed concern about the overall seriousness of the situation, from tariff levels to the risk of fracturing the trade relationship between two leading global economies.
The outlook for the U.S. economy remains precarious, with Appio integrating the possibility of a recession into her forecast. Although current tariffs are not as severe as earlier feared, uncertainties persist. Appio expressed concern about repeating the current cycle in 90 days and described the process as a “roller coaster ride.”
This information was first published on Fortune.com.