Tracking market reaction as trade tensions cool

The US ‘Liberation Day’ trade tariff announcements hit the markets harder than expected, sparking uncertainty and fear. However, the recent breakthrough in trade talks between the United States and China brought a temporary truce, leading to a significant shift in market sentiment. US stocks rebounded swiftly, almost erasing the shock of the 'Liberation Day' trade tariffs. To delve deeper into the nuances of this market reaction, CNBC Africa spoke with Schalk Louw, Portfolio Manager & Strategist at PSG Wealth. Louw reflected on the recent developments, emphasizing the unpredictability of market dynamics. The sudden shift from doom and gloom to optimism highlights the volatile nature of global trade relations. While Trump hailed the discussions with China as 'progressive', it remains crucial to monitor the upcoming tariff deadlines post the 90-day truce. The looming uncertainty regarding potential tariff increments continues to cast a shadow over market stability. One intriguing aspect amidst the market recovery is the notable resilience of the dollar. Often perceived as a barometer of global economic health, the dollar's sluggish rebound post-trade truce raises pertinent questions. Louw underscored the significance of this observation, suggesting that the dollar's behavior signals underlying economic complexities and lingering inflation concerns. Furthermore, the correlation between equities and bonds has been a focal point of analysis. The S&P 500's resurgence juxtaposed with fluctuating bond yields portrays a 'risk-on' sentiment prevailing in the markets. Louw's analogy to the Jaws theme encapsulates the cautious optimism pervading investors as they navigate through volatile market waters. Addressing tactical investment strategies, Louw advocated for a cautious approach, asserting that 'cash is king' in the current landscape. With rate cuts still pending and uncertainties looming, holding cash reserves might offer a strategic advantage. Louw highlighted the performance of gold and defensive stocks post the tariff announcements, signaling potential opportunities for investors. Additionally, he predicted that defensive stocks, including tobacco and alcoholic beverage companies, might retain their allure in the later part of 2025. As the market continues to react to trade developments, investors are advised to adopt a patient and strategic stance. Navigating through the complexities of global trade dynamics demands vigilance and prudent decision-making. Louw's insights serve as a roadmap for investors seeking to capitalize on emerging opportunities while mitigating risks in an ever-evolving market landscape.