Explosive increase in the S&P 500: But no bear market?

Donald Trump announced a partial break for his trade war yesterday. At least for countries that showed no counter -reaction to the import duties he imposed. As a result, the S&P 500 shot up almost 10 percent-the largest daily climb since the Covid 19 shock.

But not a bear market?

Although this is basically a good signal and shows that the declines are mainly due to fear, the uncertainty is not completely off the table.

The import duties towards China remain in force, and the probability is great that Trump will change his strategy again in the long term. At the moment everything is extremely unpredictable and moody, which makes it impossible to draw conclusions.

Yes, the climbs are nice and show that the market is waiting for the end of the trade war, but it is very questionable whether it is already coming to an end.

It all depends on the further development of the American and the global economy. For the time being, the situation seems to be sufficiently under control, and the fear of a deep recession seems exaggerated – but it shouldn’t take it too long.

The uncertainty remains

There is no clear recession in the United States’ economic data. For example, look at unemployment, which is still at 4.2 percent at a historically low level.

It is true that the economic data is getting worse and fear increases, but there is no question of actual decline yet. For the time being, a short period of the decline seems to be the most likely scenario.

For example, look at the credit spreads in the graphic below. This number represents the additional interest that smaller companies have to pay in order to lend capital compared to the interest that the American government pays on government bonds.

The higher this interest, the more risk see investors for the economy. During the financial crisis in 2008, for example, the credit spreads reached a maximum of 20 percent, no question is now.

However, there is a strong increase that could lead to this, and of course it is the result of uncertainty. The risks have increased and investors want to be compensated for.

This risk could be eliminated if Trump suddenly stops his trade war, but for the time being there is no question. Ultimately, what is what Bitcoin And the stock markets need to start a new bull run.