Markets Cheer Truce, But Caution Lingers Beneath the Rally

A sweeping shift in market sentiment has gripped global investors following a surprise US-China tariff truce, sparking rallies across equities while putting pressure on safe-haven assets like gold and bonds. The 90-day de-escalation, which significantly reduced tariffs, injected optimism into financial markets, pushing the Nasdaq 100 into bull market territory and lifting the S&P 500 over 3%. However, despite the surge in risk appetite, underlying concerns about inflation, policy uncertainty, and global supply dynamics continue to cast a shadow over the outlook. This week’s market reaction reflects both relief and caution as investors digest the truce’s short-term boost and weigh its long-term implications.

Nasdaq Roars: US-China Truce Sparks Bull Market Bounce

Wall Street surged after a surprise US-China tariff truce, with the Nasdaq 100 officially entering a bull market and the S&P 500 jumping over 3%. Investors welcomed the 90-day de-escalation, which slashed US tariffs on Chinese goods from 145% to 30% and boosted risk appetite. Big tech stocks led the rally, while defensive assets like bonds and gold slumped. Despite the optimism, economists warn that high tariffs, even at reduced levels, could still weigh on growth and inflation. Markets now await economic data to see if the rebound has staying power.

Trade Truce Eases Recession Fears, But Slowdown Still Ahead

A temporary US-China trade truce is expected to reduce the risk of a recession, but won’t prevent an economic slowdown already underway in the US. Economists warn that job losses may begin appearing by late May, and inflation is likely to pick up in June data. The 90-day tariff reprieve has lifted market sentiment, but analysts say it won’t reverse damage already done by prior tariffs and front-loaded demand. While growth is forecast to slow from 2024 levels, the deal has prompted some economists to slightly raise 2025 GDP projections and lower recession odds. Nonetheless, risks tied to inflation, policy uncertainty, and global trade disruptions remain high.

Gold Loses Shine as US-China Truce Sparks Risk Rally

Gold steadied near $3,237 an ounce after a sharp 2.7% drop, as optimism over a US-China tariff truce dampened demand for safe-haven assets. The deal triggered a rally in stocks and the US dollar, while pushing Treasury yields higher, all weighing on bullion. Although gold remains up nearly 25% year-to-date, traders are reassessing its appeal amid reduced recession fears and fewer expected Fed rate cuts in 2025. Caution lingers, however, as investors await more clarity on the deal’s durability.

Technical Analysis

Following the formation of a key low at 16,313.88 on April 7, the NASDAQ 100 Index has advanced over 29% (low to high), underpinned by a bullish failure swing reversal. The higher low at 17,588.02, followed by a break above the 19,238.83 peak, signaled a shift in momentum and paved the way for continued gains.

A bullish “Golden Cross” — where the 20-period EMA crossed above the 50-period EMA — has further reinforced the uptrend, suggesting sustained buying interest. Momentum indicators remain supportive: the Momentum Oscillator is holding above the 100 mark, and the RSI continues to trend above its neutral 50 level.

That said, a negative divergence between the Momentum Oscillator and price action introduces a note of caution, hinting at a potential pause or pullback in the near term.

Should bullish momentum continue, the index may next target resistance at 21,890.65, with further upside potential toward 22,244.49 and 24,549.80. On the downside, initial support lies at 20,178.84, with deeper retracement levels seen at 19,238.83 and 17,588.02.

Oil Slips as Supply Surge Tempers Trade Truce Optimism

Oil prices dipped after a brief rally, as rising global supply concerns outweighed optimism from the US-China tariff truce. Brent crude fell to $64.56 and WTI to $61.43, after hitting two-week highs on Monday. While the 90-day tariff pause lifted market sentiment, analysts warn that uncertainty remains, and surging OPEC+ output could keep the market well supplied through midyear. Mixed views on US crude inventories also added to the cautious outlook.

Conclusion

The US-China tariff truce has sparked a broad wave of optimism across financial markets, propelling equities higher and reviving risk appetite. However, beneath the surface, concerns about inflation, supply dynamics, and the durability of the agreement continue to temper sentiment. While the Nasdaq 100’s bull market breakout and the easing of recession risks offer encouraging signs, caution remains warranted. Investors will be closely watching upcoming economic data to determine whether this rally has legs, or if it’s simply a temporary reprieve in a still-uncertain global environment.