Wall Street has put trade war anxiety "behind it" and is focusing on interest rate cuts and artificial intelligence to boost the bull market in US stocks.

With the market's growing optimism about the Fed's rate cuts, for most investors on Wall Street, the anxiety triggered by the global trade war has gradually become a thing of the past. Since US President Donald Trump first proposed a large-scale global tariff plan in April, the S&P 500 index has risen by 32%, with most forecasters expecting the index to continue to rise further by the end of the year. Expectations for future volatility in the market remain low, and analysts' expectations for corporate profits in the first half of 2026 are gradually returning to levels seen at the beginning of the year. Although the Trump administration's tariff policy has suppressed business confidence and is slowly raising consumer prices, Wall Street's current focus is on the Fed's interest rate path and the continued hype in the field of artificial intelligence. These two factors are supporting the bull market trend in the S&P 500 index. Bloomberg Intelligence strategists Michael Casper and Wendy Song wrote in a report to clients on September 9th, "This trade war seems like a nightmare, mostly existing in the imagination of Wall Street." Analysts recently set record speeds for lowering their earnings expectations for the S&P 500 index, which had been the fastest since the outbreak of the pandemic in 2020. Now they are quickly raising these expectations. This trend highlights the market's confidence in US corporate growth, which is providing support for the S&P 500 index during the bull market. After hitting a low point in July, the S&P 500 index's earnings expectations for 2026 have been rising weekly for the past nine weeks. Bloomberg Intelligence data shows that the index's earnings per share expectations have now reached $295, close to the level at the end of April. Dave Mazza, CEO of Roundhill Financial, said, "If inflation data rebounds, tariff concerns may reemerge, but this is not enough to dampen the current positive atmosphere. The high probability of rate cuts and strong corporate earnings are the core drivers of the stock market's rise, while the artificial intelligence craze provides additional momentum." With second-quarter corporate earnings growing by 11% year-on-year (three times higher than the previous quarter's expectations), this is not only due to the resilience of consumer demand but also to continued investment in the field of artificial intelligence. Analysts' optimism is further heating up. As a result, earnings expectations for companies over the next three quarters are currently on an upward trajectory. Recently, United Airlines revealed a slight improvement in travel demand, with the CEO stating that his confidence in the global economy has significantly increased compared to a few weeks ago. Data released last week showed that US inflation in August met market expectations, indicating that the Fed's rate cut process will proceed as planned. According to the US Bureau of Labor Statistics, the core Consumer Price Index (CPI) excluding volatile food and energy prices rose by 0.3% in August compared to July, with a year-on-year increase of 3.1%. Michael Cantorowitz, Chief Investment Strategist at Piper Sandler & Co., pointed out that some companies are being negatively affected by tariffs, but so far, this impact is more pronounced in the Institute for Supply Management (ISM) price index than in the Consumer Price Index (CPI). He said that like many macro concerns, trade policy is fundamentally a "micro issue". He further added that the market's resilience is partly due to a reduction in the uncertainty related to tariffs, rather than investors completely ignoring the issue. As the S&P 500 index rises, the Bloomberg index tracking global trade uncertainty has fallen from its peak in April to the lowest level this year. Dek Wheeler, Head of Global Macro and Emerging Markets Strategy at Citi Group, stated that the current actual tariff rate in the US is around 9%, much lower than the theoretical published rate of about 18%. He believes that the main reasons for this gap are twofold: "transshipment" - where goods are rerouted through low-tariff countries to the US; and official exemptions for new or existing tariff policies. Whether the trade war will escalate again in the future depends on which of these two factors is the actual cause. Wheeler said that if it is the former, there may be further adjustments to targeted tariffs in the future; if it is the latter, it means that a "moderate trade war" may be one of the current government's policy objectives. Matt Malley of Miller Tabak & Co. said, "The tariff issue is no longer the focus of investors' attention. However, when the next earnings season arrives, it is likely to become the focus of the market once again. The impact of tariffs was always expected to show in the second half of the year, so by October, investors will be paying attention to how companies address this issue."