Bank of America's Hartnett: The market is expecting Trump to shift towards "lowering tariffs, lowering interest rates, and lowering taxes."

Global stock markets staged a stunning "deep V" rebound in April, with the S&P 500 seeing a continuous rise for 9 days since the sharp fall in early April, setting a record for the longest continuous rise since November 2004. In response to this, Bank of America's Chief Investment Officer Hartnett pointed out in a recent research report that this trend indicates that investors expect Trump to shift to a "three lows" policy in his second hundred days, namely lowering tariffs, lowering interest rates, and lowering taxes. At the same time, concerns about a recession in the US economy sparked by "soft" data are also easing. Hartnett pointed out that the yield on 2-year US Treasury bonds has fallen by 70 basis points since Trump took office, oil prices have fallen by 20%, and the US dollar has depreciated by 9%, all of which have contributed to loose financial conditions. In addition, capital expenditure by tech giants in the field of AI remains strong, with an expected total of $320 billion by 2025, collectively easing concerns about a recession. It is expected that there will be no recession in the second quarter. Looking back at Trump's first hundred days in office, the performance of the financial markets has been mixed. Gold has risen by 21% since the beginning of the year, making it the best start since the Ford presidency. The S&P 500 index has fallen by 7%, marking the worst performance since Ford. The US dollar has fallen by 9%, the worst performance since the Nixon era. These price trends are mainly driven by factors such as DeepSeek, DOGE, and tariffs. Previously, US macroeconomic data weakened, with GDP shrinking in the first quarter and the GDP growth rate for 2026 expected to drop from 2% to 1.5% and continue to decline. Hartnett pointed out that as long as employment data does not collapse (which has not happened so far), market sentiment can remain relatively stable. Hartnett also pointed out several key indicators he is monitoring. The global financial industry ETF (IXG) has broken through a new high of $105, indicating that there will be no recession in the second quarter. Meanwhile, if bond yields rise when economic data is poor (similar to the situation in early April), bearish investors in risky assets will strike again. Although the market seems to believe that a recession can be avoided again, oil prices are still the only asset that signals a comprehensive recession and/or slowdown in growth, also reflecting geopolitical peace (leading to increased supply from Russia/Iran). Hartnett stated that from a more macro perspective, oil prices have fallen by 56% since the Russia-Ukraine conflict in 2022, and have fallen by 17% since April 2. Furthermore, Hartnett also recommended being "long in international markets," as once concerns about a global economic recession diminish, oil prices will eventually reverse significantly, benefiting oil-importing countries in Asia and Europe. He also recommended bonds and gold, forming the "BIG" investment portfolio. This article is reprinted from "Wall Street News," written by Jiaoyao Fang; GMTEight editor: Yuanhua Jiang.