Trump "calmed down" for a day, U.S. bonds temporarily catch a breather, U.S. stocks rebound slightly

For the current U.S. market, no news from Trump is good news.

On Monday, after experiencing the storm triggered by Trump's trade war, Wall Street finally welcomed a brief respite. The U.S. Treasury market ended a five-day selling spree, with the 10-year Treasury yield falling about 12 basis points to 4.37%, and U.S. stocks rebounded moderately, with the S&P 500 index rising 0.8%.

(U.S. Treasury yield trend)

This temporary respite stems from Trump's temporary tariff exemptions on imports of smartphones and other electronic products, as well as no further escalation of trade conflicts.

Meanwhile, the U.S. Treasury Secretary also stepped in to soothe market sentiment. Besant stated in a media interview that his department has tools to stabilize the market if necessary. Besant also denied claims that foreign governments are selling U.S. Treasuries: "I don't believe foreign investors are selling." He also pointed out that demand from foreign investors increased in last week's auctions of 10-year and 30-year U.S. Treasuries.

However, investors remain on high alert. As Adam Phillips, Managing Director of Investment at EP Wealth Advisors, said: "We are not out of the woods yet; a press conference or social media post could trigger new headwinds."

The Danger is Not Over

The current market is at a critical crossroads, and how Trump's trade policy unfolds next, along with how the Federal Reserve responds, will determine the market direction ahead.

Michael Wilson of Morgan Stanley believes the worst may be over, but the outlook remains uncertain. He stated that the 90-day suspension of reciprocal tariffs and further concessions over the weekend have reduced the likelihood of a near-term recession, but uncertainty remains high, and the Federal Reserve is holding steady, with long-term rates also posing a resistance.

Chris Larkin of Morgan Stanley E*Trade believes that for the rebound to sustain in the short term, investors may need to see the White House continue to show flexibility on tariffs.

Jay Woods of Freedom Capital Markets stated: "At the start of this week, traders will again closely monitor social media and news updates to understand the latest developments in this never-ending 'tariff increase, tariff removal' saga. The current administration excels at keeping market participants on their toes."

Keith Buchanan, Senior Portfolio Manager at Globalt Investments, expressed the confusion of many market participants: "In the past few weeks, it feels like the government is trying to establish its international trade policy stance in real time. We are all trying to figure out what is actually happening." Despite all the turmoil and uncertainty, most stock strategists still expect the S&P 500 index to rise for the remainder of 2025. However, historical data shows that when the S&P 500 index falls more than 15% in early April, it has only turned positive by the end of the year three times: in 1982, 2009, and 2020, and each time it was due to the Federal Reserve intervening to support a weak U.S. economy.

Federal Reserve Governor Waller stated at an event in St. Louis on Monday that the new tariff policy is "one of the biggest shocks to the U.S. economy in decades." However, he noted that the impact of tariffs on inflation may be temporary. Waller indicated that if high tariffs lead to a severe economic slowdown, it could force the Federal Reserve to cut interest rates more quickly to support economic growth, while lower tariffs could prompt the Federal Reserve to implement "good news" style rate cuts later this year.

Risk Warning and Disclaimer

The market carries risks, and investment should be approached with caution. This article does not constitute personal investment advice and does not take into account the specific investment goals, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article align with their specific circumstances. Investing based on this is at one's own risk