Global View

U.S. equities moved sharply higher, Treasury bonds & gold moved lower and the dollar pivoted higher as sentiment seems to have returned to U.S. assets once again. Is the trade truce the real deal though? Investors seem willing to give foreign equities a look, but only when conditions or sentiment really turns negative in the United States.

The market is continuing the settling down process following a volatile April featuring peak trade uncertainty. The reduction in volatility has allowed equities to produce a decent rebound over the past 2-3 weeks, but the core long-term issues remain. Even a significant reduction in tariff rates is likely to produce a meaningful economic slowdown and a potential recession can’t be written off. I think there’s a good possibility that this is just a short-term bounce on the way to retesting recent lows.

It appears that simple anger might be the thing that finally de-escalates the global trade war. The long-awaited Q1 GDP number is set to hit on Wednesday and it won’t be good. We’re in the heart of Q1 earnings season and all eyes are on forward guidance. One of the stronger signs that we’re still under risk-off conditions is the resilience of international stocks.