Friday, 3 Oct 2025
Friday, 3 October 2025

Markets Rise on Trade Deal Hopes and Solid Job Growth

Photo credit: Luis Alvarez /Getty Images

By: Brent Schutte, CFA

The major indices added to their recent winning streak last week and have now fully recovered from the early April sell-off stemming from the Trump administration’s announcement of reciprocal tariffs. The levies were paused for 90 days shortly after they were announced, and since then, market performance has largely been driven by the latest developments in trade negotiations. Indeed, stocks received a boost last Friday on news that China was interested in making a trade deal after previously suggesting that it was up to the Trump administration to initiate negotiations. Last week’s news on China follows recent statements from the administration that it was in negotiations with up to 100 trading partners and hinting that an agreement might be imminent with at least one country.

Encouraging comments out of the White House have led investors to grow increasingly optimistic that the Trump administration will soften its approach to trade and as a result will reduce the likelihood of a recession. While we recognize it is possible that trade deals could be struck that will reduce the level of tariffs placed on imports from the levels announced initially, we continue to believe that the administration is determined to apply levies as part of its efforts to reorient the global economy and the role of the U.S. in it. As such, we believe the sharp rebound in equities over the past two weeks suggests that the risks that come with such a significant change to the global economy are likely not fully reflected in investor behavior. Until final trade deals are in place and their impacts are reflected in the hard data (such as employment numbers and sales data), it is premature to draw conclusions about how things will play out.

To be sure, hard data that we detail later in this commentary offers a mixed view of the economy, with the latest jobs report showing solid gains in hiring, while the initial estimate of first-quarter gross domestic product (GDP) fell short of expectations. Likewise, so-called soft reports continue to point to risks of a slowdown and rising prices as a result of new tariffs. However, these reports offer a snapshot of the economy before most of the president’s policies have been implemented. In addition to tariffs, businesses will likely be affected by changes to the tax code and deregulation. Put simply, we believe despite the recent rebound for the major indices, uncertainty will persist in the coming months, and we may see more volatility going forward.

While we believe uncertainty will remain elevated for a while, we also believe the best way to address it is by focusing on the long term and staying diversified to avoid concentrating too much on any one market segment or asset class.

About the Author:

Brent Schutte, CFA, is the chief investment officer of the Northwestern Mutual Wealth Management Company.

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