Stockmarket history seems to be repeating itself, almost to the year. In 2025, Donald Trump sent markets reeling with the now legendary reciprocal tariffs. It then took investors a few weeks to remind themselves of the existence of the “TACO Trade” theory, namely the idea of betting on the gradual softening of the US president’s stance, given that he always opens negotiations by pulling away the tablecloth so that all the crockery comes crashing to the floor, while making as much noise as possible.
On 7 April 2025, the market hit a low, hesitated for a while, then surged higher again, posting 17 gains in 20 sessions between 22 April and 19 May. Everyone was still somewhat worried about the long-term impact of tariffs on inflation, but everyone was buying anyway, just to see. In 2026, the war in Iran has replaced reciprocal tariffs and everyone is somewhat worried about the long-term impact of surging oil prices on inflation, but everyone is buying anyway, just to see. After all, it worked the year before.
The rebound in April 2026 has taken Wall Street back to its peak. The accumulation of threats hanging over markets still looks dreadful, but listed companies are not suffering too badly, and nor are economies. “At least at this stage…”, economists generally like to add. That is their job, after all, to warn about risks. Nevertheless, US investors keep buying. They are buying the dip. European investors rather less so, or at least not European equities. Indices on the continent are struggling to recover after the war in Iran, despite the ceasefire now in force and hopes of a negotiated peace. Oil remains loftily priced, with Brent hovering around $98 and WTI in the $93 area, in other words 60% above where it stood on 1 January.
Without the colossal flows of money being pumped into the AI funding pipeline, equity markets would probably be in a sorry state and investment bank research notes would be plastered with talk of recession, stagflation and unemployment. Thanks to AI’s pull, the calamities have been forgotten, though I am reserving judgement on unemployment, no doubt we shall revisit that on 17 April 2027.
In the meantime, investors are shopping with one basket of beaten-down tech stocks and another basket of AI tech names. They have little interest in the rest. They no longer eat chocolate, with Barry Callebaut down 15.6% yesterday after dreadful results. They no longer watch television, with Netflix off 9% after hours following uninspiring guidance and the departure of its co-founder. They no longer go on holiday either, with airlines and cruise operators dominating the list of yesterday’s worst performers. Nor will they be buying Alstom this morning, with the stock sinking 12% in pre-market trading after a major warning on its targets.
On the geopolitical and macro front, forty countries are due to discuss a mission in the Strait of Hormuz in Paris. That might please Donald Trump, who branded his allies a bunch of cowards after they refused to get involved in the conflict. It could help reduce the risk premium in oil. There will be no major data releases to round off the week.
The bullish rally has left markets in Asia a little short of breath: Hong Kong is down 1.3%, Japan 1.0%, South Korea 0.5% and Australia 0.2%. India, somewhat detached from the major recent moves, is bucking the trend with a 0.3% gain. Europe is still hesitating, with leading indicators hovering around flat.
Today’s economic highlights:
On today’s agenda: the balance of trade in Italy and the Euro Area; in China, the year-to-date foreign direct investment year-over-year; in Canada, housing starts; in the United States, speeches by Fed Barkin and Fed Waller. See the full calendar here.
