Global stock markets staged an astonishing 'deep V' rebound in April, with the S&P 500 experiencing nine consecutive days of gains after plummeting in early April, marking the longest winning streak since November 2004.
In this regard, Bank of America Chief Investment Officer Hartnett pointed out in the latest research report that this trend suggests investors expect Trump to shift to a 'three low' policy in the second hundred days, namely lowering tariffs, lowering interest rates, and lowering taxes.
At the same time, concerns about a U.S. economic recession triggered by 'soft' data are easing. Hartnett points out that the 2-year U.S. Treasury yield has fallen by 70 basis points since Trump, oil prices have dropped by 20%, and the dollar has depreciated by 9%, all contributing to the loosening of financial conditions.
Additionally, strong capital expenditure by tech giants in the AI field, expected to reach $320 billion by 2025, has collectively alleviated concerns about a recession.
A recession is not expected in the second quarter.
Reviewing the first hundred days of Trump's presidency, the financial market's performance has been mixed. Gold has risen 21% year-to-date, marking the best start since the Ford administration. The S&P 500 has fallen 7%, the worst performance since Ford. The dollar has depreciated by 9%, the worst performance since Nixon. These price movements have been primarily driven by factors such as DeepSeek, DOGE, and tariffs.
Previously, U.S. macro data weakened, with a contraction in Q1 GDP and the GDP growth forecast for 2026 declining from 2% to 1.5% and continuing to drop. Hartnett points out that as long as employment data does not collapse (which it hasn't so far), market sentiment can remain relatively stable.
Hartnett also notes several key indicators he is watching; the global financial sector ETF (IXG) has broken above $105, indicating that no recession will occur in the second quarter. At the same time, if bond yields rise amid poor economic data (similar to early April), short positions on risk assets will strike again.
Although the market seems to believe that a recession has been avoided again, oil prices remain the only asset indicating a comprehensive recession and/or economic slowdown, while oil prices also reflect geopolitical peace (leading to increased supplies from Russia/Iran). Hartnett stated that from a broader perspective, oil prices have fallen by 56% since the Russia-Ukraine conflict started in 2022 and have dropped by 17% since April 2.
Furthermore, Hartnett also suggests 'going long in international markets', as once concerns about a global economic recession fade, oil prices will ultimately reverse significantly, which is beneficial for Asian/European oil-importing countries. He also recommends bonds and gold, which together form the 'BIG' investment portfolio.