President Donald Trump recently announced a preliminary trade agreement with the United Kingdom, signaling a potential shift in U.S. trade policy. The announcement comes just days into the U.S.’s ongoing trade negotiations with China. Trump has failed to roll back his signature 145% tariff on Chinese goods. This recent move is a piece of a larger puzzle as the administration continues to pursue its strategy to mitigate international trade hostilities.
The joint agreement with the U.K. lays the groundwork for further trade negotiations to come. Its short-term potential is likely to be modest. Chris Zaccarelli, Chief Investment Officer at Independent Advisor Alliance, commented on the significance of the deal, stating, “While trade with the UK pales in comparison to trade with our neighbors to the North and South, and especially in comparison to China, it is an important test case and a model for what could be accomplished.”
Besides the U.K. deal, Trump laid a 90-day pause on elevating tariffs for most other countries last month. He sounded an optimistic note on next week’s talks with China, saying Yuan for one expects U.S. negotiators to have a “happy weekend.” A 10% tariff rate is only the starting point, according to President Trump. Specifically, he threatened that countries with significant and growing trade surpluses would be subject to far increased stiff tariffs in the future.
Even as the news developed throughout the morning, stock futures indicated a divided investor reaction to the news. Futures for the Dow Jones Industrial Average rose 14 points, or 0.03% at the time of publication. S&P 500 futures were up by 0.07%, while Nasdaq 100 futures advanced 0.12%. Performance across the major market indexes was uneven, with the tech-heavy Nasdaq Composite nabbing an almost 1.1% gain. The S&P 500 is on pace for a 0.4% drop. At the same time, the Nasdaq is headed to a decline of 0.3%.
Investor sentiment optimism is cautious, but really optimism. According to the last weekly survey by the American Association of Individual Investors, 29.4% of Main Street investors answered with a bullish outlook and showed confidence in the market. This figure is in stark opposition to the historic average of 31.0% for investors with a negative outlook.
A series of financial performance reports from prominent firms helped put a finer point on the day’s volatility. Affirm provided fiscal fourth-quarter revenue guidance in a range of $815 million to $845 million. On the other hand, Coinbase posted $2.03 billion in revenue—a sign that their industry is doing very well right now.
Zaccarelli noted the potential implications of the new trade agreement: “If the administration can follow this up with additional agreements, it would go a long way toward healing a stock market that has been battered and bruised this year.”