By Peter Tchir of Academy Securities

The President undid a few things yesterday with a single post on Truth Social yesterday. It sparked a market rally of almost 10% in the S&P 500.

Had we done this on “Liberation Day” I think stocks would have sold off a touch. The tariff rate was close enough to reciprocal that markets would have digested it (I still think true reciprocal would have been better, as it was priced in, but this was close). The 90 days makes a lot of sense as it gives time to actually negotiate, and for importers to think through alternatives (if they need).

But, with the rates China has applied to them, we have raised U.S. overall tariff rates quite a lot since China is a large exporter.

The Do-Over also reduces the risk that Europe or other countries retaliate with tariffs targeted at services (i.e. tech). That is a big deal.

Yesterday’s rally leaves the Nasdaq almost back to its pre-Liberation Day levels. The S&P 500 and Russell 2000 are a bit further away.

My view is that had this policy been announced originally, we would have had a small sell-off as China would have been hit, but no one else would have seen material tariffs, and most would have negotiated anyways. So, should we be back here?

My take is yesterday’s rally got us into the right zone as to where we would be had this been the original deal on Liberation Day. I’d err to the side that we might be at the high end of the range, and that seems to be what the market is telling us at the moment as stocks are down 2%.

Now we can get back to “normal” business (at least until some new major headline hits the tape).

In what direction is the economy is headed? I still think weak, though less weak, less quickly after yesterday’s change. More opportunities for positive developments.

It is much easier to be bearish bonds again though. The only real budget item that we seemed to get in the last week (now that tariff revenue is delayed for everyone except China) is that the military spending is likely to grow. I was never a big believer in tariff revenue being major relief in the budget negotiations, so I’m not too worried about that aspect of the deficit plan. But we need to see progress on that. I think it is probably a good sign that DOGE seemed to slow down the pace of announcements, as they are likely digging deeper and identifying things that can be changed.

The best news, from my end, would be a pivot to building out industries critical to national security.

Chips, energy, rare earths and critical minerals, ship building, pharmaceuticals are all things we need (I do think we can partner with countries, though I’m not sure if that is on the admin’s agenda or not). Launching plans to get those things going would be great and what I was hoping for from day 1.

Expect markets to be a bit less volatile in the coming days as the news comes in dribs and drabs, but be prepared for more potential market moving headlines (which is maybe why VIX hasn’t dropped as much as it normally would).