The S&P 500 closed up 0.55% yesterday on good news about US GDP growth and President Trump walking back his threat to impose more tariffs on Europe if Greenland is not given. After a sell-off earlier this week, the S&P is once again above 6,900, within 1% of its all-time high. Gold also hit a new record yesterday.
But futures for the index fell 0.24% before the New York open, and after a mixed close in Asia, European markets sold off slightly this morning, suggesting traders took profits after yesterday’s gains.
On the macro front, Wall Street analysts are optimistic. It was a marked change from the apprehension of the past few days.
In fact, Trump’s tariffs have proven to be a much smaller economic deal than “previous worst-case fears,” JPMorgan said. Dubravko Lakos-Bujas and his team said that the company adjusted its pricing and supply chain, resulting in “a much lower actual tariff rate of about 11% (versus the expected 15%).” “Only 14% of S&P 500 companies are highly sensitive to tariffs.”
The bank said the situation might be better if the U.S. Supreme Court rules that the president does not have the authority to unilaterally impose tariffs.
Lakos-Bujas told clients: “Prediction markets place the odds of the Supreme Court ruling against the government at over 65%, and those odds have been stacked against the government, especially following oral arguments before the Supreme Court in November.”
Analysts were also pleased that U.S. GDP was revised upward to 4.4% in the third quarter of last year.
“Real growth of 4.4% is well above normal and will likely slow during the year, but if we can stay above 3% for the full year, it could result in double-digit returns for the stock market,” Chris Zaccarelli, chief investment officer at Northlight Asset Management, said in an email. wealth.
Gregory Daco, chief economist at EY Parthenon, is singing the same hymn. “This momentum is being driven by strong consumer spending, strong equipment and artificial intelligence-related investment, a sharp increase in international net trade and a rebound in federal spending. The U.S. economy is neither overheating nor stagnant — it is adjusting,” he said in a note.
All of which explains the calmness in our markets today.
Jim Reid and his team at Deutsche Bank said: “For some assets, the sell-off almost never happens, with the VIX Volatility Index (–1.26 points) back to 15.64 points, below where it was before Saturday’s tariff announcement.”