Why the joy? Because the uncertainty caused by Trump’s tariff negotiations/threats/demands/letters is finally clearing away. Yesterday markets digested the proposed trade deal with Japan (15% tariffs plus some other stuff), and this morning there are reports that the EU is closing in on a deal (again, 15% tariffs plus some other stuff). Those rates are half of what Trump initially proposed.

The TACO trade (Trump Always Chickens Out) appears to be in full effect, for anyone who was long on stocks.

Japan and Europe are two of the U.S.’s largest trading partners, and now that the markets have some certainty around trade, it’s back to “risk-on” for investors, according to Jim Reid’s team at Deutsche Bank.

“The risk-on tone has continued over the last 24 hours, with the S&P 500 (+0.78%) at a fresh record thanks to growing optimism that more trade deals would be reached before Aug. 1. The initial catalyst was the U.S.-Japan deal we woke up to this time yesterday, with both European and U.S. risk assets rallying as they caught up to the news. But around the time that European markets were going home, an FT [Financial Times] headline said that the EU and the U.S. were closing in on a similar deal that would also put 15% tariffs in place,” he wrote. 

“If a 15% total rate inclusive of existing tariffs is agreed as suggested, this would mark only a marginal increase compared to the 10% additional tariffs that EU exports to the U.S. have faced since Liberation Day but with certainty about the future.”

The key word there is “certainty.” It’s what the markets want. The other uncertain issue that’s now in the rearview mirror is Trump’s fiscal spending/debt bill. “The passage of the ‘One Big Beautiful Bill’ removes one major source of policy uncertainty by extending key expiring provisions of the Tax Cuts and Jobs Act (TCJA), thereby averting a fiscal cliff worth 1% of GDP in 2026–27,” Gregory Daco at Parthenon-EY told clients.

With certainty back on the table, “risk appetite is up,” according to Christian Mueller-Glissmann and Andrea Ferrario at Goldman Sachs. The bank’s proprietary “Risk Appetite Indicator” had been floundering below -1 on the scale for much of the year but has now poked its head back into positive territory.

Here’s a snapshot of the action prior to the opening bell in New York:

• S&P 500 futures were flat this morning, premarket, after the index closed up 0.78% yesterday.
• STOXX Europe 600 was up 0.58% in early trading.
• The U.K.’s FTSE 100 was up 0.85% in early trading.
• Japan’s Nikkei 225 was up 1.59%.
• China’s CSI 300 Index was up 0.7%.
• India’s Nifty 50 was down 0.51%.