What a difference a couple of months makes. After the Nasdaq Composite slid as much as 24% mid-February to the beginning of April, the index is up 4.14% in pre-market trading. That returns the Nasdaq to levels last seen in mid-January, shortly before Donald Trump’s inauguration.
Here’s a check at major indexes as of 7:15 a.m. in pre-market trading:
Dow Jones Industrial Average: +1084 (+2.62%)
S&P 500: +185.75 (+3.26%)
Nasdaq: +846.25 (+4.21%)
The big news driving markets forward today is the announcement of a trade deal with China. Let’s dig into the details.
The Details on the China Trade Deal
The headline on the U.S. trade deal with China is that ‘reciprocal’ tariffs announced on April 2nd have been paused for 90 days. That doesn’t mean all tariffs will be removed, however. The U.S. base rate of 10% tariffs on China as well as a special 20% ‘fentanyl tariff’ will remain, meaning that Chinese goods will face up to a 30% tariff.
U.S. goods entering China will still face a 10% tariff, as well.
The pause comes after delegations from the United States and China met in Switzerland this weekend. Markets are cheering the news as China was seen as the major adversary against the United States in a trade war that began heating up in mid-February. If the U.S. can strike a deal with China, the belief is that tariff pressures will dramatically ease as it strikes agreements with other countries across the world. Earlier in the week, the United States had announced another deal with the United Kingdom.
One question facing investors next will be whether stocks are now to richly priced. After all, the Nasdaq now trades back to where it was in mid-January despite economic forecasts having deteriorated since then. Unfortunately, if you’ve been on the sidelines you’ve missed your ‘buy the dip’ opportunity.
At least, for now.
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