Trade Tensions Ease as U.S. and China Move Toward Negotiations

According to BlockBeats, the SPX index achieved a historic nine-week winning streak, recovering all losses since the Liberation Day crash, as the U.S. government softened its stance on trade policies. Both the U.S. and China are making efforts to resume trade talks, with recent adjustments in trade departments and negotiators. China has acknowledged receiving messages from the U.S. expressing a desire to negotiate, which it is currently evaluating. A Bloomberg survey indicates that the market expects the Trump administration to eventually respond to market changes, despite previous attempts to blame issues on Biden's legacy. The market believes the government has reached a 'pain threshold' that may lead to a pause in tariff actions. Positive signals from trade discussions were complemented by a surprisingly strong non-farm employment report released last Friday, boosting market risk appetite. The report showed an increase of 177,000 jobs in April, with the unemployment rate steady at 4.2%, alleviating immediate recession fears. However, the true impact of tariff policies might only be evident in data from May to June. The stock market's rebound suggests an implied recession probability of only 8%, much lower than economists' estimates or fixed-income market implications. In the fixed-income market, the yield curve has flattened to February levels, with a 30% chance of a rate cut in June and only about three cuts expected for the year. Meanwhile, actual inflation data continues to decline, and positive signals from central banks regarding U.S. debt holdings have stabilized the bond market. In the cryptocurrency sector, overall volatility remained low last week, with prices stable. Although BTC briefly reclaimed the 96k level, it faced short-term profit-taking pressure. The volatility curve flattened, indicating a lack of clear market direction, with actual volatility at its lowest point this year. If macro assets remain stable, cryptocurrency prices are expected to consolidate in the short term, with a potential bullish bias in the medium term. Despite modest inflows, ETF funds have seen positive net inflows, nearly surpassing early first-quarter highs. Looking ahead, with the SPX recovering post-Liberation Day losses, the 'easy' part of the rebound is complete, and prices are entering a technical resistance zone. Historically, bear market rallies are volatile and irrational, but this rapid rebound has triggered positive divergence signals that could push prices back to January highs. The upcoming FOMC meeting is not expected to significantly impact the market, with no clear direction anticipated. Ultimately, market movements will depend on corporate earnings growth, which is projected to reach nearly 13% year-over-year in the first quarter, doubling early earnings season expectations and marking the second consecutive quarter of double-digit growth. If forced to choose, the 'pain trade' remains further price increases, as most observers remain fixated on the irreversible nature of tariffs. However, caution is advised, as bear market rallies can be deceptive.