Monday's trading session saw equities continue their ascent to record highs with minimal volatility, a trend that has persisted despite a series of hawkish tariff headlines. This market behavior stands in stark contrast to the last trade war episode, which triggered a significant selloff following the initial tariff announcement and subsequent 18 months of sideways movement and heightened volatility.

Deutsche Bank (ETR: DBKGn ) analysts have pointed out several reasons for the current market's resilience. First, post-election rallies are common as markets adjust to reduced uncertainty, and the recent surge aligns with historical patterns without any major deviations in medium to long-term trends. Secondly, markets had largely anticipated the possibility of tariff escalations, reducing the element of surprise.

Furthermore, companies have become adept at handling various disruptions over the past few years, including previous tariff impositions, which has likely contributed to the market's tempered response. Additionally, cyclical growth indicators, such as manufacturing PMIs, are currently positioned for potential growth, unlike during the onset of the last trade war when they were at cyclical peaks.

Lastly, Deutsche Bank suggests that the sequence of policy announcements, leading with tariffs, may be strategic. This approach differs from market expectations and could be viewed as a precursor to growth-stimulating measures. The anticipation of such 'carrots' following the 'tariff stick' may be acting as a buffer against market downturns, in contrast to the previous scenario where positive catalysts had been exhausted by the time tariffs were introduced.

Equity markets, according to Deutsche Bank, are displaying a level of complacency in the face of tariff news, but this stance is supported by several factors that differentiate the current situation from past trade tensions. The analysis emphasizes the preparedness of companies and the potential for growth incentives to follow, which may be keeping investor sentiment stable despite the hawkish trade rhetoric.

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