Markets surge on Trump’s trade pivot and Fed signals — will the risk rally last?

Risk appetite returned to global stock markets this week, driven by President Donald Trump‘s unexpected indication that tariffs on China might be reduced, coupled with his confirmation that Jerome Powell would remain Federal Reserve Chair. The dovish shift in trade rhetoric and assurance over monetary policy leadership triggered sharp gains across equities, led by technology stocks in the United States and bolstered by stronger-than-expected corporate earnings in Europe.

The S&P 500 Index advanced 0.7% over the week, while the Nasdaq Composite surged 1.3%, reflecting a robust rebound in investor sentiment after weeks of cautious trading. Alphabet Inc. (NASDAQ: GOOGL) and Nvidia Corporation (NASDAQ: NVDA) led the rally, posting outsized gains on strong earnings and positive future guidance. Alphabet reported a 46% jump in net profit to $34.54 billion for the first quarter, with revenues climbing 11% year-on-year, driven by growth in advertising and cloud segments. Nvidia shares gained 4.3% after the company projected record-high sales of its AI chips, reflecting booming demand across data centers.

However, not all major tech companies shared in the exuberance. Intel Corporation (NASDAQ: INTC) saw its stock fall nearly 7% after forecasting second-quarter revenue of $12.5 billion, below analysts’ expectations. The semiconductor giant flagged weaker demand in traditional computing markets as a headwind, despite emerging AI-related opportunities.

Why Did Risk Appetite Recover in Stock Markets This Week?

This week’s resurgence in stock market risk appetite can be traced to a combination of political and monetary catalysts. President Trump’s comments about a potential rollback of tariffs on Chinese goods signaled a sharp shift from his previously aggressive stance that had roiled markets since 2018. The US-China trade war had weighed heavily on corporate investment and global GDP growth, with the International Monetary Fund estimating a 0.8% drag on world output during peak tensions.

Trump’s reaffirmation of Jerome Powell’s leadership at the Federal Reserve provided a second major boost. Investors had long feared executive interference in the independent functioning of the Federal Reserve, especially after earlier reports suggested Trump had considered replacing Powell over monetary policy disagreements. A stable Fed, committed to data-dependent decisions, is viewed as critical for maintaining financial market confidence.

Historically, easing trade tensions and clarity on monetary leadership have sparked periods of strong equity market performance, particularly in the technology, industrials, and consumer discretionary sectors.

Why Are Tech Stocks Like Alphabet and Nvidia Rallying Stronger Than Others?

Technology stocks have led the recent rally as investors reallocated funds toward growth sectors benefiting from secular trends. Alphabet Inc. delivered strong quarterly results, reporting operating margins of 30% compared to 26% in the same quarter a year earlier, supported by efficiency gains across its cloud and advertising businesses.

Nvidia Corporation continued its upward trajectory, riding the artificial intelligence wave. The company reported preliminary quarterly revenues of $22 billion, far surpassing Wall Street expectations, and raised its full-year outlook, citing massive demand for H100 and A100 AI training chips. Analysts at Goldman Sachs noted that Nvidia’s performance “underscores the AI revolution’s transformative impact across industries,” a trend expected to drive robust sector growth into 2026.

Despite the tech euphoria, Intel Corporation’s softer outlook reminded investors that legacy computing businesses remain vulnerable. Intel forecast gross margins of just 38%, below its historical range, as weakness in consumer PCs and server markets offset early AI-driven opportunities.

How Are European Markets Reacting to Renewed Risk Sentiment?

European markets, too, reflected the shift in global risk sentiment, with the Stoxx Europe 600 Index rising 0.9% for the week. Earnings surprises from key multinationals such as LVMH Moët Hennessy Louis Vuitton and Siemens AG offered evidence that corporate Europe remains resilient despite broader economic headwinds.

Luxury goods, industrial automation, and healthcare sectors led gains, consistent with historical patterns during periods of improving global trade expectations. Analysts at HSBC suggested that “European equities, particularly exporters, remain well-positioned for a soft-landing scenario if U.S.-China tensions ease meaningfully.”

European Central Bank policymakers, while maintaining a cautious stance, also hinted that they would consider policy adjustments if geopolitical tensions escalate again, further supporting risk assets.

What Is the Market’s Sentiment Based on Institutional Flows?

Institutional flow data indicated a modest but broad-based shift towards riskier assets. Net inflows into U.S. equity funds totaled $5.8 billion this week, with technology and consumer discretionary sectors receiving the lion’s share. Fixed-income inflows decelerated, suggesting that investors are rotating back into equities amid reduced volatility.

Options markets reflected a similar story. The CBOE Volatility Index (VIX) dropped 12% week-on-week to its lowest reading since February, while put-to-call ratios implied reduced hedging activity. However, positioning remains moderately defensive, with balanced flows into healthcare and utilities sectors indicating some caution remains.

Strategists at Morgan Stanley noted that “the rally is tactical rather than structural,” with investors quick to reprice risk premiums amid evolving macro conditions.

What Are Analysts Expecting for Markets Going Forward?

Looking ahead, analysts expect the equity rally could extend if further signs of trade detente emerge. Hints from U.S. and Chinese negotiators suggest that new talks are scheduled for early May, raising hopes for concrete tariff rollback announcements ahead of the G7 summit.

On monetary policy, futures markets are now pricing a 68% probability of a 25-basis-point interest rate cut by the Federal Reserve at its June meeting, reflecting softer inflation prints and a slight uptick in initial jobless claims.

Sectorally, further M&A activity in technology and healthcare is anticipated. Analysts at JPMorgan forecast that “AI-driven consolidation among cloud and semiconductor companies could accelerate” through the second half of 2025, adding another potential catalyst for equity markets.

However, geopolitical risks — including Middle East tensions and European political uncertainty — remain key downside factors that could reverse risk appetite quickly.

Tactical Risk-On Rally, But Watch Trade Talks Closely

While the sharp recovery in investor sentiment has driven major indices higher, the rally remains contingent on political and economic follow-through. Trump’s rhetoric has bought markets some breathing space, but tangible tariff reductions and continued Fed neutrality will be critical in sustaining momentum.

For now, the market narrative has pivoted towards optimism — with technology, luxury goods, and industrials leading gains — but the undercurrents of uncertainty persist. Investors are likely to stay nimble, balancing opportunity with vigilance as global dynamics evolve.