Investors are eyeing a stock market rebound after Friday’s trade war flare-up sent the S&P 500 to its worst loss since April.
“Don’t worry about China, it will all be fine!” he wrote. “Highly respected President Xi just had a bad moment. He doesn’t want Depression for his country, and neither do I. The U.S.A. wants to help China, not hurt it!!!”
“Market participants appear to be leaning into the TACO trade once more, fueled not only by what we’ve seen in the recent past, but also by conciliatory remarks over the weekend from both President Trump and Vice President Vance, suggesting that Friday’s announcement of additional 100% tariffs on Chinese imports are likely to be little more than a negotiating tactic,” Michael Brown, senior research strategist at Pepperstone, said in a note on Sunday.
Futures tied to the Dow Jones Industrial Average surged 323 points, or 0.7%. S&P 500 futures were up 0.9%, and Nasdaq futures jumped 1%.
The yield on the 10-year Treasury tumbled 8.9 basis points to 4.059%. The U.S. dollar was up 0.13% against the euro and up 0.58% against the yen.
Brown said Trump’s new China tariff, which would go into effect Nov. 1 and bring the overall level to 130%, appears to be another example of his “escalate to de-escalate” strategy.
“Assuming that this is another ‘TACO’ situation, and some clarity on that front is obtained before too long, then this is likely to prove another dip in equities that should be viewed as a buying opportunity, with the path of least resistance continuing to lead higher, if in somewhat choppy fashion,” he added.
At the same time, the Federal Reserve’s shift back to rate cuts amid still-solid economic growth should continue to boost to the dollar, which will likely shrug off tariff threats, Brown predicted.
Similarly, market veteran Ed Yardeni, president of Yardeni Research, also sees the U.S. and China pulling back from the precipice.
“If neither side were to blink, the US and Chinese economies would lead the global economy into a deep recession, if not a depression,” he wrote in a note on Sunday. “But we expect that both sides will blink very soon given the extremely adverse consequences of a trade war between the world’s two biggest economies.”
Looking beyond rare earths, it’s one that leverages control over strategic materials and technologies to prop up global influence.
“China is effectively saying: ‘We control the arteries of high-tech civilization.’ The rest of the world now sees that message clearly—and is scrambling to build new circulatory systems,” Yang wrote.
