‘A little more conversation to avoid a greater catastrophe’ is the adage that characterizes the recent talks between the U.S. and China. With both nations agreeing to de-escalate the trade and unwind most tariffs imposed since April 2025, the market’s reaction has been receptive to this information. The U.S. and China lowered tariffs to 30% and 10%, respectively, and agreed to a 90-day pause while further discussions occurred.

Tentativeness Present in The U.S. Consumer

The pause in the U.S.-China trade war and the fervor associated with it have led investors and onlookers to ponder whether this is the beginning of a return to normalcy. However, one must remember that the pause is temporary unless both entities ratify an agreement. Until such an agreement is made, there remains a sense of tentativeness within the U.S. economy.  The idea of tentativeness was present in recently reported data showing that U.S. consumer sentiment has fallen to the second-lowest level on record, and inflation expectations climbed to multi-decade highs.

Difficult Business Climate

As detailed in the Federal Reserve’s recent Business Leaders Survey, business activity continues to be challenging, with the current business activity index at -16.20 and the current business climate index at -51.70. Furthermore, when business leaders were asked to consider the future business environment, their outlook remained predominantly negative, as captured in the chart below.

Navigating an Uncertain Economic Landscape

Although the Trump administration's current actions indicate progress toward a new trade framework involving countries, especially China, consumers and business leaders continue to feel considerable uncertainty. As mentioned in an earlier article, low volatility solutions continue to be a value-add strategy during periods of market uncertainty.

For Canadian investors, the Invesco S&P 500 Low Volatility Index ETF (Tickers:  ULV.C/ULV.F/ULV.U), BMO Low Volatility US Equity ETF (Tickers: ZLU/ZLH/ZLU.U), CIBC Qx U.S. Low Volatility Dividend ETF (Ticker: CQLU) and Franklin U.S. Low Volatility High Dividend Index ETF (Ticker: FLVU) have provided compelling year-to-date returns relative to the S&P 500 Index.

Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.