Stock Market Soars Following Trump’s Tariff Pause: Volatility Ahead

The U.S. stock market has staged an impressive comeback, bouncing back significantly after President Donald Trump’s recent announcement to delay certain tariffs for 90 days. This announcement, while still keeping China in the crosshairs of increased tariffs, reignited investors’ confidence and resulted in remarkable gains across major indices.

A Day of Notable Gains

On Wednesday, April 9, 2025, the S&P 500 jumped by an extraordinary 9.5%, marking its strongest one-day percentage increase since October 28, 2008. The Dow Jones Industrial Average experienced a meteoric rise of 2,962.86 points, or 7.9%, representing its largest rally since March 24, 2020. The Nasdaq Composite also had an outstanding day, soaring by 12.2% for its most significant gain since January 3, 2001.

Market analysts attributed this robust rally to a rebound effect following a severe downturn triggered by Trump’s initial announcement of sweeping tariffs on April 2. Investors suggested that the market had become oversold, and any positive developments could lead to a powerful rebound.

Trump’s Tariff Announcement

In a social-media post on Wednesday, President Trump indicated that while China would face a new tariff of 125%—up from 104%—most other countries would benefit from a temporary baseline tariff rate of 10% for the next 90 days. This significant pivot came shortly after a new wave of tariffs had been implemented, which included a 20% tax on imports from the European Union, 24% from Japan, and 25% from South Korea.

Market participants noted that the announcement further isolates China as the primary adversary in Trump’s ongoing trade war. According to Michael Arone, chief investment strategist at State Street Global Advisors, “New U.S. tariff rates were not sustainable… Today, the Trump administration finally admitted it. Investors got their first bit of good news since last Wednesday.”

Looking Ahead

As stocks surged, attention turned to the Tuesday’s S&P 500 close of 4,982.77, which was its lowest point since April 19, 2024, teetering on the brink of a bear market. Renowned investor Louis Navellier observed, “This is the biggest rally I’ve ever seen in the market, and it’s stunning,” while questioning whether investors would need to retest recent lows. His verdict suggested that the announcement was “decisive enough.”

Bond Market Strain Influencing Policy

Interestingly, it appears that strains in the bond market might have had a role in Trump’s change of course. A spike in Treasury yields hinted at waning confidence in the traditional safety of Treasury securities. Analysts speculated that the market was facing a forced unwinding of popular leveraged trades, raising concerns about a possible market seizure that would necessitate Federal Reserve intervention.

Despite the positive news, many uncertainties loom. The market’s decline following Trump’s tariff announcement raised fears of a recession, but in light of the tariff pause, economists at Goldman Sachs revised their assessment, indicating that a recession was no longer their base-case forecast for the economy.

Expecting Continued Volatility

While the market experienced a day of euphoria, investors are advised to brace themselves for potential volatility in the coming weeks and months. As Trump’s trade policy evolves and solidifies, the markets could continue to react to news and developments related to tariffs and trade relations.

As noted by State Street’s Arone, “The trade war may not be over, but at least for today, investors have won the battle.” The rally serves as a reminder of how quickly market sentiment can shift, underscoring the importance of staying informed and prepared for the inherent volatility characteristic of today’s financial markets.

In summary, the pause on new tariffs has invigorated the stock market significantly, offering relief to investors who endured intense fluctuations just days prior. Future moves, particularly regarding trade relations with China and other countries, will likely continue to shape market dynamics in the near term.