U-turn ?

The “alchemist-in-chief” ignited a remarkable rally in equity markets yesterday, announcing a 10% tariff for 90 days on all trading partners except China. Markets reacted with enthusiasm: the Nasdaq surged by 12.2%, the S&P 500 gained 9.5%, and Japan’s market is up 8.6% this morning. European futures are also trading strongly higher.

Meanwhile, Trump escalated tensions with China by raising tariffs on Chinese goods to 125%, shifting the dynamic from broad-based trade negotiations to a more targeted trade war. It’s increasingly clear that other partners, particularly Europe, may be pressured to adopt a tougher stance on China in order to avoid being hit by U.S. tariffs themselves.

Interestingly, the recent market volatility was largely triggered by Trump — and yesterday's rally shows it can be just as easily reversed by his own administration. In that sense, the so-called “Trump put” remains in place. The Federal Reserve, for its part, has so far stayed on the sidelines, choosing not to intervene.

Yields on 10-year U.S. Treasuries stand at 4.29% this morning — still a level that challenges the fiscal sustainability of the U.S. administration. Ultimately, the game being played is one of trust — and much of that trust has been lost.

At ECP, we continue to believe that the most effective strategy in this environment is to invest for the long term in companies trading at reasonable valuations. We remain calm, focused, and ready to seize opportunities as they emerge. The bond market remains a key concern — and likely the final arbiter of whether the Trump 2.0 experiment can hold.