Market Risks Persist After U.S.-China Trade Detente

This episode explores the market's positive response to a 90-day pause in reciprocal tariffs between the U.S. and China. Against the backdrop of this temporary trade truce, the S&P 500 saw significant gains, and credit markets rallied, reflecting reduced recession risk. More significantly, the analyst highlights that while this de-escalation is positive, it doesn't eliminate trade tensions entirely; investigations into tariffs on various products are ongoing. For instance, the probability of a US recession has decreased, but inflation is expected to rise due to existing tariffs, which are still substantially higher than pre-year levels. This means that while the immediate market reaction is positive, underlying uncertainties remain. In conclusion, the 90-day pause reduces the risk of a sharp economic downturn, but the long-term impact on inflation and growth remains uncertain, impacting both risk and credit markets.