Markets enter the "bull market" after the trade agreement between the US and China
Market indices closed today with significant gains following the announcement of a trade agreement between the United States and China. The Nasdaq index rose sharply and returned to bull market levels, after hitting its lowest levels in April.
The details of the agreement were surprising to many investors and observers, especially since expectations were pointing to a reduction in tariffs to around 40%. Due to this positive atmosphere, liquidity shifted from gold to high-risk assets, in an attempt to benefit from the rise.
The agreement is temporary and lasts only three months, which means that trade tensions may return, raising some concerns for investors in the medium term.
This agreement may open the door to disagreement between the Trump administration and the Federal Reserve. Federal Reserve Chairman Jerome Powell may find himself in a difficult position if he relies on this agreement to change monetary policy, especially if the temporary agreement does not become permanent after its expiration.
This trade agreement is a significant shift compared to previous tariff figures, but it will not prevent
Some companies, especially small businesses, and even large companies like Apple, are not in an ideal position. It was reported today that Apple is considering raising the prices of its new phones that will be launched this fall. This news prompted President Trump to call the CEO of Apple (although Trump mentioned that the call was for other reasons).
According to reports, Apple is trying to justify the price increase as a result of new features in the phones and not due to tariffs.
There is also an important point that the agreement did not address, which is the Chinese tariffs on rare earth metals, which are essential materials in technology industries. Nothing was mentioned about this issue, and the Chinese side did not respond to questions related to it.
Despite the optimism today, there are important economic data this week that may reignite doubts and increase tensions between Trump and Powell. Tomorrow, inflation data (CPI) will be released, and on Friday, producer price index (PPI) data for April will be released, through which the impact of tariffs (145%) on inflation can be measured.
Expectations indicate that inflation may have risen compared to March. If that happens, it will confirm the validity of the Federal Reserve's recent decisions.
However, this data may not be sufficient to prompt the Fed to make quick decisions, as the agreement only started in May, and thus it would be better to wait for next month's data to gauge the actual impact on inflation.
The internal institutional conflict will continue.