The major stock market indexes are still up since Election Day despite recent turbulence caused by DeepSeek and Trump Tariffs 2.0 (chart). The former is weighing on the shares of AI companies. However, cloud giants Amazon, Microsoft, and Google remain committed to spending record sums this year to build out their AI capacity. Asked last week about the AI cost efficiencies represented by DeepSeek’s widely followed advances, Amazon CEO Andy Jassy echoed the sentiments of other tech leaders in saying that he expects the trend to increase overall AI demand.
Trump Tariffs 2.0 hit the stock market hard on Friday after President Donald Trump said he plans to announce reciprocal tariffs on many countries by Monday or Tuesday of this coming week, a major escalation of his offensive to tear up and reshape global trade relationships in the America's favor.
We view this as a positive development given that Trump previously planned to impose a uniform 10%-20% tariff on all US imports. The reciprocal approach leaves plenty of room for the US to negotiate tariff cuts with each of America's trading partners separately. They're Trump's "art of the tariff" deals!
Trump's reciprocal tariff threat also spooked the bond market on Friday (chart). That's because higher tariffs would cause at least a one-time spike in consumer prices which might trigger a renewed inflation cycle. Another possible reason for the backup in the bond yield on Friday is that the Bond Vigilantes figure that Trump's reciprocal approach to tariffs suggests that he may be abandoning the idea of a uniform tariff aimed at raising revenues.
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