The stock market’s rally has legs, as the trade negotiation with China was seemingly the toughest one on the docket, and the idea that there has been this much progress on the negotiations over such a short period of time, suggests that a resolution may be on the horizon.
The softer-than-expected CPI for the month of April is encouraging news, but we still anticipate higher inflation readings over the coming months, as it may take time for tariffs to work their way through the economy and reflect in the inflation data.
Thursday’s PPI will be another important data point to gauge how tariffs are affecting inflation, but based off of Tuesday’s weaker-than-expected CPI, we anticipate an equally soft PPI reading for April. We would not be surprised to see higher inflation data over the coming months as tariffs work their way through the economy and have the potential for boosting consumer prices.
Even with progress on trade talks and softening inflation, we anticipate the Federal Reserve to hold off on any rate cuts for the next 4–6 months, to allow more time for some of these uncertainties to pass. It’s possible that we’ll see one rate cut towards the end of this year.
While there are undoubtedly still uncertainties and details to iron out with the trade negotiation with China, the easing of tensions is apparently enough for the markets, which are typically forward looking and are pricing in an environment where the U.S. and China are able to trade with each other. Trade was not possible with 145% reciprocal tariffs between the two nations.
What is remarkable about the market’s rebound since the April lows is the leadership of the technology sector, which was not leading the market in the early months of 2025 before the tariff situation escalated. We anticipate tech may continue to lead this market, as the sector stands to benefit from easing trade tensions and as investors once again resume their excitement over the promise of artificial intelligence.
Even if we see a continued economic slowdown, the stock market may have already priced that in during the April selloff.
