Daily Newsletter 5/12/25
The US-China trade deal provided immediate relief to global markets, sparking a broad-based rally and reducing fears of an imminent recession. The temporary nature of the agreement means markets will remain sensitive to further developments in the ongoing negotiations.
We are very pleased that the agreement has reduced the immediate risk of a recession in the US and, by extension, globally.
We believe there are valid reasons to exercise caution regarding the current bullish sentiment.
While the deal is a positive step and justifies some optimism, the underlying risks and temporary nature of the agreement argue for a measured, rather than exuberant, bullish stance. We believe investors should stay vigilant to upcoming developments and avoid assuming that all challenges have been fully resolved.
The deal does not address deeper structural disagreements between the US and China, such as technology transfer, intellectual property, and export controls on critical minerals. These unresolved issues could easily resurface and disrupt negotiations.
The trade war has already caused significant disruptions to supply chains, reduced corporate investment, and led to job losses. It may take time for businesses to regain confidence and for economic activity to fully recover.
The sharp rally could reflect relief and short-term optimism rather than a fundamental improvement in economic conditions. If talks stall or disappoint, markets could quickly reverse course.
We do not intend to sound pessimistic or overlook the positive outcomes of the US-China trade agreement; however, we believe it is prudent to remain cautious until more data emerges and we better understand how the markets will absorb these developments over time.
Overall, the US-China trade agreement is the dominant event shaping market sentiment this week, offering relief from immediate recession fears but leaving some uncertainty about the durability of the truce and its broader economic effects.
OUR TRADES
Below, you will find our portfolio, which is divided into two sections: the Tactical Portfolio and the Medium-to-Long-Term Portfolio.
We share all entry and exit points of our tactical trades with our paid subscribers, along with detailed explanations for why each trade was initiated.
If you found this post helpful, we invite you to become a paid subscriber. Our service offers in-depth macroeconomic and financial analysis, along with educational resources for anyone looking to expand their knowledge of the markets and the economy.