US stocks edge higher as trade talks take centre stage

The opening bell rang on Wall Street this Tuesday with a sense of anticipation. Investors, still catching their breath from a volatile spring, watched as the major indices inched higher. But this wasn’t just another day of numbers ticking up and down. Behind the scenes, a high-stakes drama was unfolding—a story about tariffs, rare earths, and the delicate dance between the world’s two largest economies.

Trade truce hopes lift markets

It’s no secret that the U.S. and China have been locked in a trade war that’s sent shockwaves through global markets. After a temporary truce in Geneva, tensions flared again, this time over rare earth minerals—critical for everything from smartphones to electric cars. As top officials from both sides gathered in London, investors hoped for more than just handshakes.

President Trump, ever the showman, told reporters, “We’re doing well with China. China’s not easy,” but stopped short of giving details. White House economic adviser Kevin Hassett was more specific, saying the U.S. expects China to resume rare earth shipments immediately if a deal is struck. For now, the talks have extended into a second day, with both sides seeking to revive the fragile truce that had briefly calmed markets.

The impact of these talks can’t be overstated. Chinese exports to the U.S. plunged 34.5% year-on-year in May—the sharpest drop since the early days of the pandemic. On the American side, confidence has wobbled, and the economy shrank in the first quarter as businesses rushed to buy goods before tariffs hit. Yet, despite the noise, inflation has stayed muted and jobs have held steady. “The market’s message remains largely positive here,” said Chris Verrone, chief market strategist at Strategas. “Cyclical stocks are continuing to perform well. The economy is predominantly healthy here”.

Rangebound optimism meets real risks

The S&P 500, Dow Jones, and Nasdaq all posted modest gains as the week began. The S&P 500 even closed above 6,000 for the first time since February—a psychological milestone that hints at underlying optimism. But analysts warn not to get carried away. “Markets are no longer priced for an adverse outcome,” wrote a Fidelity strategist. “This puts a ceiling on how far the market can rally from here, while leaving us open to some downside risks”.

The real story may be that 2025 is shaping up to be a year of boundaries, not breakouts. With interest rates rising and the threat of new tariffs always lurking, many see the market trading in a range—neither soaring to new heights nor plunging into crisis. “If I am right about this rangebound outlook, it suggests that the bull market that started in October 2022 may well have ended in February 2025, and that a new bear market may now be underway,” the Fidelity strategist added. “That said, it might be a modest one. We could be in a bear market that doesn’t correspond with a recession”.

As the London talks continue, investors remain glued to headlines, hoping for signs that the world’s two economic giants can find common ground. For now, the market story is one of cautious optimism—buoyed by the hope of a deal, but ever aware of the risks that still linger on the horizon.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Winvesta. We advise investors to check with certified experts before making any investment decisions.

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