Spotlight on the Geneva Convention: A Critical Examination of Global Humanitarian Standards

Global markets have shown a steady footing this week, buoyed by the potential for numerous trade agreements from the Trump administration. Investors are particularly optimistic following the recent US-China trade discussions held in Switzerland. The S&P 500 and Nasdaq indices have rebounded, erasing the 15% losses seen in the aftermath of the controversial "Liberation Day" tariffs declared by Trump. Meanwhile, Germany’s DAX has reached new heights, and Japanese stocks are enjoying their longest winning streak in over two years.

Market Sentiment and Stimulus Measures

Investor confidence has been further enhanced by a series of stimulus initiatives from China, which include interest rate reductions and liquidity infusions. The Bank of England has also followed suit with rate cuts, while the Bank of Japan appears to have paused its tightening measures. Although the U.S. Federal Reserve has maintained its existing policies, the market finds reassurance in this stability amidst ongoing uncertainty.

Earnings Insights: Approximately 450 companies within the S&P 500 have disclosed their first-quarter earnings, showing an approximate growth rate of 14%. However, the outlook for the second quarter is less rosy, with negative forecasts outnumbering positive ones by nearly 50%, based on IBES/LSEG analysis.

Despite the optimism surrounding trade, caution prevails in U.S. markets. Wall Street and Treasury yields remained relatively stable throughout the week. Investors are acutely aware of the unpredictable nature of the current administration, as President Trump and Vice President JD Vance have publicly criticized Fed Chair Powell, with Trump suggesting that tariffs of 80% on China "seemed right," a comment later downplayed by the White House.

The Tariff Landscape Ahead

As negotiations progress, the anticipated tariffs may end up being lower than those proposed on April 2, yet they will remain considerably higher than pre-Trump levels. Economist Phil Suttle highlights that while the impact of tariffs has not yet been fully realized, their effect is imminent, predicting an average U.S. tariff rate of around 22%, a substantial increase from when Trump took office.

Goldman Sachs economists warn that although current economic data appears resilient, the economy could be on the brink of a slowdown. For investors, the current scenario raises the question: Are you optimistic due to the likelihood of lower tariffs, or are you concerned about significantly elevated rates compared to previous years?

Looking Ahead to Trade Talks

With all eyes set on Geneva, a U.S. delegation led by Treasury Secretary Scott Bessent is set to engage in trade discussions with Chinese negotiators, including economic advisor He Lifeng. The outcomes of these talks could significantly influence market dynamics come Monday.

Key Market Developments This Week

Major U.S. indices, including Wall Street’s three primary benchmarks and the MSCI World Index, closed within 0.5% of last week’s levels, hinting at underlying volatility.
Germany’s DAX has reached record highs, achieving an 18% increase this year and a 27% rise since its post-Liberation Day low on April 7.
Japanese stocks have climbed for four consecutive weeks, supported by a weaker yen.
U.S. high-yield credit spreads have tightened for five weeks straight, a trend not seen in two years, now resting at 350 bps.
Bitcoin has surged nearly 10%, crossing the $100,000 threshold for the first time since February.

Chart of the Week: Fiscal Challenges Ahead

In January, Elon Musk, CEO of Tesla and owner of the social media platform ‘X’, was brought into the Trump administration with ambitious goals to slash federal spending and reduce the budget deficit by $2 trillion. However, his initial efforts have not yielded the expected results, and spending has reportedly increased beyond levels seen under the Biden administration.

Morgan Stanley economists project that the budget deficit for 2026 will hit 7.1% of GDP, up from 6.7% in 2025, translating to an increase of approximately $310 billion. Such figures could unsettle investors and exert additional downward pressure on long-term Treasuries.

Potential Market Movers on Monday