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US stock futures climbed sharply on Monday as investors reacted to signs that President Donald Trump may take a softer approach after previously threatening steep new tariffs on China.
By 06:30 ET (10:30 GMT), Dow futures had gained 433 points, or 1.0%, S&P 500 futures rose 87 points, or 1.3%, and Nasdaq 100 futures jumped 453 points, or 1.9%.
This came after stocks fell sharply on last Friday after Trump said he would impose a new 100% tariff on imports from China in November after the country announced that it was tightening exports of rare earths, which are a critical component in a range of military and consumer items. China responded to Trump on Sunday, “We are ‘not afraid of trade war.”
Trump then dialed down the rhetoric, sort of, and wrote: “Don’t worry about China, it will all be fine! Highly respected President Xi just had a bad moment.”
As the trading week begins anew, investors are again pressed to speculate on the implications of Trump’s comments and decide if it’s part of a grand plan, random musings that reflect a President who’s inclined to share stream-of-consciousness thinking in public, or something in between.
The possibilities are wide open this morning, but let’s start from what we do know. Friday’s selloff was dramatic with the S&P 500 Index falling 2.7%, its biggest daily drop since the original tariff tantrum in April. Unnerving, but the decline barely dents the market’s upside trend.
This could be the start of an extended downturn, or not. Trump’s mercurial announcements will surely keep everyone guessing. The main antidote for strategic-minded investors is to stay focused on market trends as a first approximation of what the crowd is pricing in for the near-term future. On that basis, it’s premature to react to Friday’s selloff. Let’s see if that changes in the days ahead.
The case for watching and waiting also arises from profiling global asset allocation strategies. An aggressive mix via the iShares Core Aggressive Allocation ETF (NYSE:AOA), for example, has yet to signal elevated downside risk.
The case for viewing Friday’s slide as noise, at least for now, is in even sharper relief via a conservative version of global asset allocation (AOK).
If all you knew about markets this year was monitoring a year-to-date tally of the major asset classes you’d be hard pressed to see trouble given that everything is still posting gains for 2025.
No one knows what Trump will say or do next, nor how China (or other countries) might respond. There’s good reason to assume that all the back and forth will take a toll on economic activity, but that was true six months ago, and, as yet, there are only minor cracks in the US macro trend so far. Maybe we’re at the tipping point, but it’s still too early to assume the worst. We remain in a fluid situation, which is to say nothing’s really changed since Jan. 20.
Monitoring market trends is far from an infallible strategy when it comes to developing expectations about the near-term future. But it beats a kick in the head, or trying to unpack intent and strategy from social media comments.
Is analyzing price trends the only game in town for managing asset allocation? No, but it’s a solid first step, especially at a time when markets are again on edge and wondering if Trump’s next tweet will be a catalyst for chaos or stability.