The global financial markets are adjusting to fresh political developments following former President Donald Trump’s announcement of a pause on tariffs. This unexpected move, often referred to as Trump’s Tariff Pause, has injected a new layer of complexity into the market landscape, reshaping expectations across currencies, equities, commodities, and bonds. Investors, businesses, and policymakers are now recalibrating strategies in response to this geopolitical shift.

Trump’s decision to temporarily suspend tariffs—especially on Chinese goods—has eased fears of an imminent escalation in trade tensions, sparking a wave of optimism across risk assets. However, the full picture is nuanced, as market participants assess whether this pause is a strategic recalibration ahead of the U.S. election or a genuine de-escalation.

Fundamental Analysis

Equities Surge on Improved Risk Sentiment

Global equity markets have responded positively to the news. The S&P 500, Dow Jones Industrial Average, and Nasdaq Composite all posted gains, while European and Asian indices also rallied. Investors are pricing in reduced risks to global trade and supply chains, particularly in technology, manufacturing, and consumer discretionary sectors, which had been most vulnerable to tariff escalations.

Emerging Markets Benefit from Reduced Trade Tensions

Emerging market currencies and equities, often sensitive to U.S.-China trade dynamics, have enjoyed a relief rally. The MSCI Emerging Markets Index has advanced, and currencies such as the Chinese yuan and South Korean won have strengthened. A less hostile trade environment generally supports capital inflows into emerging economies.

Bond Yields Tick Higher

U.S. Treasury yields moved higher following the tariff pause announcement. The benchmark 10-year yield, in particular, edged upwards as investors reduced demand for safe-haven assets. The yield curve has steepened slightly, reflecting improving growth expectations.

Commodities: Oil and Copper Rebound

Oil prices rose, with Brent crude and WTI gaining ground on hopes of stronger global demand. Industrial metals such as copper, often seen as a barometer for global economic health, also rallied. Gold, however, slipped marginally as demand for safety assets weakened.

Monetary Policy Implications

The tariff pause complicates the outlook for central banks, particularly the Federal Reserve. Reduced trade tensions could dampen expectations for aggressive rate cuts. However, Fed officials will likely wait for more clarity before adjusting their policy stance, especially with inflation still sticky and growth data mixed.

Technical Analysis

US500 (S&P 500 Index) Chart Analysis – 13 April 2025

Based on the daily chart provided, the S&P 500 is currently attempting a rebound after a sharp sell-off.

Ichimoku Cloud Analysis:

• Price Position: The price is below the Kumo (cloud), indicating that the broader trend remains bearish.
• Future Kumo: The future cloud is bearish as Leading Span A (green) is below Leading Span B (red), and the cloud is angled downward. This suggests persistent downside pressure unless a strong reversal occurs.
• Conversion Line (Tenkan-Sen) and Base Line (Kijun-Sen): The Tenkan-Sen (5,263.8) remains below the Kijun-Sen (5,293.5), reinforcing a bearish momentum signal.
• Chikou Span (Lagging Span): The Chikou Span is well below price action and the cloud, confirming strong bearish momentum from a lagging indicator perspective.

RSI Analysis:

• Current Reading: RSI is at 44.50, climbing from oversold levels but still below the neutral 50 mark.
• Interpretation: This suggests recovering bullish momentum, but it is not yet in bullish territory. Watch for RSI to break above 50 for confirmation of sustained buying pressure.

MACD Analysis:

• MACD Line: -144.9
• Signal Line: -132.1
• Histogram: -12.8
• Interpretation: The MACD remains in deep negative territory, although the histogram is contracting, suggesting that bearish momentum is weakening. A bullish crossover is not yet confirmed but could occur soon if current price recovery continues.

Candlestick and Price Action Analysis:

• A strong bullish candle has formed, representing a sharp recovery.
• However, this recovery has yet to break above key resistance levels, particularly the Conversion Line at 5,263.8 and the Base Line at 5,293.5.
• Volume during the recovery is elevated, which supports the bullish bounce thesis, but further confirmation is needed.

Key Levels:

• Resistance: 5,263.8 (Conversion Line), 5,293.5 (Base Line), 5,471.5 (Upper boundary of the Kumo).
• Support: 5,150 (psychological support), 5,000 (critical psychological level).

Conclusion from the Chart: While the US500 is showing signs of stabilisation and short-term bullish recovery, the broader trend remains bearish as the price trades below the Ichimoku cloud. A decisive breakout above 5,293.5 followed by clearing the lower edge of the Kumo at 5,471.5 would be needed to shift the medium-term outlook back to bullish.

Until then, rallies may face selling pressure near resistance zones.

Sentiment Analysis

Commitments of Traders (COT) Report

• Equities: The latest COT data shows a build-up of long positions by asset managers in S&P 500 futures, confirming institutional confidence in the equity rally.
• Currencies: Speculative positioning in USD/CNH has shifted to favour yuan appreciation, with net shorts on the dollar increasing.
• Commodities: Bullish bets on copper have increased, consistent with expectations of improved global manufacturing demand.

Investor Surveys

Recent surveys such as the Bank of America Global Fund Manager Survey show a decline in cash holdings and an increase in equity allocations. The tariff pause has shifted investor sentiment from defensive to moderately risk-on, although caution remains due to lingering uncertainties about the durability of Trump’s decision.

Volatility Indicators

The VIX (Volatility Index) fell below 14, suggesting a sharp decline in market fear. However, positioning remains light, indicating that while investors are less worried about immediate risks, they are not fully committing to aggressive risk-taking.

Conclusion

Trump’s pause on tariffs has acted as a powerful catalyst for a rally in risk assets and a reset in market expectations. Equities, emerging market assets, and commodities have all benefitted, while safe-haven demand has diminished. However, the durability of these moves will depend on whether the pause evolves into a more permanent de-escalation of trade tensions or merely acts as a tactical election-year manoeuvre.

Technical analysis shows that while equities are attempting to rebound, broader bearish structures remain intact on key indices like the S&P 500. Market participants should stay vigilant and manage risk carefully, as any sign of renewed trade hostilities could swiftly reverse recent gains.

For more expert guidance on navigating the financial markets in uncertain times, explore our Trading Courses designed to help you build resilient trading strategies.