Trade Relief and Pessimism Make the S&P 500 Look More Attractive U.S. stock futures were pointing up early Friday, setting the stage for a stronger finish to a rollercoaster week. Much of the optimism stems from President Trump’s unexpected midweek shift on tariffs. Markets are reading that as a sign trade tensions may have peaked — investors see it, at least for now. Still, plenty of caution remains. Skeptics argue that the 90-day tariff pause just delays uncertainty, especially with Chinese imports still facing a steep 145% tariff. Conflicting takes like these are what drive the market — and they’re even showing up within the same firms. Case in point: On Thursday, UBS strategist Bhanu Baweja warned investors to sell into rallies, saying the S&P 500 could fall below 5,000 if the economic impact of tariffs worsens. But on Friday, a different UBS team — led by Global Wealth Management CIO Mark Haefele — took a more bullish stance, upgrading U.S. equities to “attractive” and offering three main reasons why: Adding fuel to the contrarian fire: investor sentiment is deeply bearish. The latest AAII survey shows 58.9% of investors expect stocks to keep falling. That’s down slightly from last week’s peak but still unusually high. UBS points out that such pessimism has often preceded big market rallies, with the S&P 500 posting an average 27% gain in the year following similar sentiment extremes. While UBS still sees risks if tariffs stay in place, they now think the odds of a major economic downturn have dropped. They’ve revised their worst-case S&P 500 target up from 4,000 to 4,500 — a level more in line with a normal recession, rather than a full-blown crisis.

Wall Street bounced back in dramatic fashion Wednesday after President Donald Trump announced a 90-day delay on certain tariffs—excluding those targeting China. The move sparked a massive relief rally in markets that had been battered by trade war fears. The S&P 500 jumped 9.5%, posting its best one-day percentage gain since October 2008. The Dow Jones Industrial Average surged 2,962 points, or 7.9%, in its strongest performance since March 2020. The Nasdaq Composite led the pack, skyrocketing 12.2%—its biggest single-day gain since January 2001. Markets had been under intense pressure since Trump unveiled sweeping tariffs on April 2. With stocks deeply oversold, investors were quick to seize on the shift in tone from the White House. “New U.S. tariff rates were not sustainable, and today, the Trump administration finally admitted it,” said Michael Arone, chief investment strategist at State Street Global Advisors. “Investors got their first piece of good news in over a week.” Trump’s social media post outlined the new approach: China would face a steep tariff hike to 125%, up from 104%, while other countries would see a reduced baseline rate of 10% for the next 90 days. This update came just 15 hours after “liberation day” tariffs kicked in, which had imposed a 20% rate on EU imports, 24% on Japanese goods, and 25% on South Korean products. The decision appeared to single out China as the main adversary in Trump’s trade war, a stance markets seemed more comfortable with after a previous round of China-focused tariffs earlier in his presidency. Tuesday’s S&P 500 close at 4,982.77, the lowest since April 19, had brought the index to the brink of a bear market, setting the stage for Wednesday’s rebound. “This is the biggest rally I’ve ever seen—and it’s stunning,” said Louis Navellier, founder of Navellier & Associates. “Will we revisit the lows? Probably not. This looks decisive. Clearly, Trump is watching the markets—and he reacted.” Behind the scenes, many believe mounting pressure in the bond market also influenced the policy reversal. A surge in Treasury yields, with the 10-year climbing to 4.293%, signaled investors were abandoning the usual safe-haven trade, raising fears of a liquidity crunch that could force Federal Reserve intervention. While the rollback eased immediate recession concerns, risks remain. Stocks had plunged after the initial April 2 announcement on fears the tariffs would tip the economy into a downturn. Economists at Goldman Sachs briefly made recession their base-case scenario Wednesday morning—only to revise that call after Trump’s announcement. Volatility is likely to persist, said State Street’s Arone. “The trade war isn’t over,” he said, “but at least for today, investors have won a round.”

Fed Weighs Emergency Rate Cut and Bond Market Intervention The Federal Reserve had intended to hold steady and observe how an economy already facing high inflation would react to sweeping tariffs introduced by the Trump administration. But escalating market volatility may not allow for patience. Yields on the 10-year Treasury surged to 4.52% as the new tariffs — the most severe in a century — took effect at midnight, up sharply from 4% just a week ago. Early signs of dialogue between the U.S. and China calmed markets slightly, but uncertainty remains high. Traders are now factoring in the possibility of an emergency rate cut. Federal funds futures for April suggest roughly a 20% chance of a move before the Fed’s next scheduled meeting. Other measures are also under consideration. When the U.K. bond market collapsed following Liz Truss’s 2022 mini-budget, the Bank of England stepped in with temporary purchases of long-term government debt — precisely the area now under stress in the U.S. That intervention worked. Thirty-year gilt yields had surged 130 basis points in just three days but stabilized after the Bank’s action. It even ended up turning a £3.5 billion profit on £19.3 billion in bond purchases, which were later unwound. TS Lombard’s Dario Perkins noted the Bank of England was still able to raise rates by 300 basis points and resume quantitative tightening after the intervention. “You can intervene briefly in bonds and stay hawkish on inflation,” he said. The Fed could also opt for a more technical move — targeting the overnight funding market. The swap rate between SOFR (Secured Overnight Financing Rate) and comparable Treasury maturities has been falling, a signal that liquidity is drying up and interbank lending is weakening.

Spitznagel: This Market Drop Is Just a ‘Trap’ — The Real Crash Is Still Ahead Mark Spitznagel, one of Wall Street’s most bearish and accurate investors, says the recent stock market drop isn’t the big crash he’s been warning about — it’s just a setup. “I’m expecting an 80% crash eventually. But this isn’t it. This is a trap,” Spitznagel told MarketWatch. “When the real thing hits, you’ll know.” Spitznagel is the founder and CIO of Universa Investments, a hedge fund built to thrive during extreme market shocks. Universa follows a “Black Swan” strategy, inspired by Nassim Taleb, focusing on rare, devastating events — and profiting from them. The fund made headlines in early 2020, returning over 4,100% as COVID fears tanked the market. Today, Spitznagel says Universa is still positioned as if a crash is coming — even though he doesn’t think it’s here yet. “This is another shakeout. Not the end. The real reckoning will come when this bubble truly bursts,” he said. “It’s a deeply contrarian view, but I stand by it.” Markets were volatile Monday. The Dow dropped more than 200 points (down 0.57%), the S&P 500 gained 0.35%, and the Nasdaq slipped 0.84%. Last week’s steep losses, sparked by new tariffs from President Trump, marked the S&P’s worst two-day slide since March 2020. Spitznagel has long predicted a massive downturn, one potentially worse than 1929. He’s not trying to time it exactly but warns the U.S.’s mounting debt poses serious risk. Earlier this year, he urged investors not to get caught off guard: “Don’t be the sucker who sells low and buys high.” His advice? Be positioned to weather chaos — easier said than done for most. “Our clients have stayed long through this bull market,” he said. “The doomsayers think they’ve nailed it. Take it from an actual doomer — they haven’t. And they’re not ready for what’s coming.” Still, Spitznagel believes retail investors can keep it simple. In a 2023 Fortune interview, he recommended low-cost index funds and disciplined investing — especially during downturns. His key point: stay invested, don’t overextend, and avoid panic selling.