Here’s why stock market soared Wednesday President Donald Trump’s 90-day respite on certain tariffs sparked a massive rally. Investors reacted positively, setting off an extraordinary rally. The increase in Dow Jones Industrial Average futures — up 196 points, or 0.5% — shows investor optimism about the new tariff rates. One of the biggest political advances in U.S. history pushed the major indices to new record highs. The Nasdaq Composite reveled in that index’s largest one-day gain since January, 2001!
Interestingly, the gains were not confined to just the Dow and Nasdaq. The S&P 500 gained more than 9% through the entire day of trading. This enormous spike makes just the third-largest one-day increase since World War II. After Trump made his announcement, futures linked to the S&P 500 jumped by 0.4%, while Nasdaq-100 futures were trading higher by 0.1%. WOW—the Russell 2000 really shined this round! It exploded up 8.7% and closed at 1,913.16 – its biggest one-day leap since March 24, 2020.
On Wednesday evening, Trump declared that tariffs for most countries would be temporarily reduced to 10% for a period of 90 days. At the time, this decision was widely viewed as a step to relieve rising trade frictions and boost the economy amid volatile global conditions. The announcement was music to investors’ ears, resulting in some of the largest short term gains ever seen on the stock market.
Even with the euphoria over the announcement, analysts pointed out that questions are still left. Jeffrey Roach, chief economist at LPL Financial, cautioned that “Market volatility could remain elevated, despite the 90-day pause on tariffs for non-retaliating countries.” His statement makes clear why we should be concerned about this reprieve. While it could provide some temporary respite, ongoing trade challenges are likely to roil the markets as those fundamental trade tensions resurface.
What’s more, Mohamed El-Erian, Allianz’s chief economic advisor, stressed the lack of standard deviation going forward. “But I think you need certainty,” he said, underscoring the role of unambiguous economic policies in avoiding a future disaster.
“Even Trump himself could recognize the mood of the market in response to his surprise announcement. “I thought that people were jumping a little bit out of line,” he remarked, suggesting that while the rally was significant, it may not fully reflect the broader economic landscape.”
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