Stocks are sanguine despite the tariff chaos
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Since Donald Trump announced his "Liberation Day" tariffs on the afternoon of April 2, the most important markets for the U.S. economy have weakened significantly. The stock market, by contrast, has risen.
Why it matters: As the reminder often goes, The Stock Market Is Not The Economy. Still, it helps to set the broader vibe, and over the past couple of weeks, greed and optimism have had something of a resurgence.
- In fact, the S&P 500 is up for nine straight sessions, its strongest run since late 2004.
The big picture: Immediately after the tariffs were announced, the dollar weakened sharply — a sign the market was pricing in economic weakness — and has remained weak even as the stock market has recovered.
- Similarly, the yield on the 10-year Treasury bond, the most important benchmark lending rate in the nation, is still higher than it was before tariffs were announced. And, of course, the U.S. economy shrank in the first quarter, which is hardly a bullish sign.
Between the lines: What Bloomberg has described as "a big risk-on surge" can be seen not only in stocks but also in the credit and crypto markets, with spreads tightening and bitcoin rising back to near the $100,000 level.
Where it stands: Analysts (and journalists) felt very comfortable attributing the fall in the stock market to the tariff news, but it remains far from clear what might be driving the bounce back.
- For every sign of deescalation in the trade war, there's another sign that things might get worse rather than better.
For example: On Thursday, for instance, Trump wrote on Truth Social that any nation buying oil from Iran "will not be allowed to do business with the United States of America in any way, shape, or form."
- China is the biggest buyer of Iranian oil. Similarly, Japan has threatened meaningful saber-rattling when it comes to negotiations with Trump.
The bottom line: Stocks have risen, but no one is really certain why.
