For weeks now, a single word has seemingly driven economic activity every day, upending equities, bond markets, currencies, corporate forecasts and more. That word: “uncertainty.” On Monday, a new word finally entered the trending lexicon: “optimism.”

After the US and China announced a 90-day trade truce struck in Geneva over the weekend, investors bet Monday that a full-blown tariff war between the economic superpowers is now unlikely. The ensuing optimism drove the S&P 500 3.2% higher, kicked off a drawdown in defensive market positions, eased recession fears, and more.

Well, That Was Unexpected

Virtually no one expected weekend talks between the two superpowers to end with the US agreeing to slash duties on Chinese imports to 30% from 145% for 90 days and China making a similarly dramatic reduction in tariffs on American goods to 10% from 125%. And, in the split second it took officials to hit send on a joint statement, the risk appetite generated by optimism, for at least one day, took the place of uncertainty.

There was the Nasdaq, up 4%, signalling a banner day for tech and chip stocks like Meta (up 7.9%) and Nvidia (up 5.4%). There was the small-and-mid cap Russell 2000, up 3.4%, signalling optimism in firms that are more vulnerable to economic downturns. There was Hong Kong’s Hang Seng Index, up 3%, and the onshore CSI 300 index, up 1.1%, which – like US indexes – have erased losses since President Trump’s “Liberation Day” tariffs announcement sent markets reeling. And Europe’s Stoxx 600 joined the cheery mood, rising 1.2%. (Although, on Tuesday, the Hang Seng shed 1.8% as investors continued to digest the news — other regional bourses in the Asia-Pacific like Japan’s Nikkei, which rose 1.4% on Tuesday, sustained the optimistic rally.)

Defensive positions also eroded Monday with spot gold falling 3%, a Treasury selloff pushing the 10-year yield up to 4.454%, and the Japanese yen, British pound and euro losing appeal as safe haven currencies. The US Dollar Index, which tracks the value of the dollar relative to a basket of foreign currencies including those three, rose 1.4%. ING analysts wrote that the credit space is about to witness “a very busy month for supply” — construction equipment giant Caterpillar was one of several firms selling debt on the investment-grade bond market Monday amid the return of risk appetite. However, where risk has returned, there’s one notable institution that could use the market optimism to exercise even greater caution:

• Federal Reserve Chair Jerome Powell has long said the central bank, which held interest rates steady last week, will play it safe until it has “further clarity” on tariffs — and the 90-day tariff pause between China and the US now has an Aug. 10 expiration date.
• Given the Fed’s new operating window, investors pushed back their bets on an initial rate cut this year to September, with the CME Fedwatch showing an expectation of just two rate cuts amounting to a half-point reduction in 2025.

What’s Next: No location has been set, but Treasury Secretary Scott Bessent told CNBC he expects to meet with Chinese officials “in the next few weeks” to “get rolling on a more fulsome agreement.” Already, the macro optimism has eased recession forecasts: Oxford Economics said Monday the chances of a recession in the next 12 months fell to 35% from 50%. Betting markets Polymarket and Kalshi, which both predicted a more than 50% chance of a recession in 2025 at the end of last week, placed the odds at roughly 40% on Monday.

Pharma companies may need more than a spoonful of sugar to digest President Trump’s latest prescription: An executive order he said will slash US drug prices anywhere from 59% to “even 90%.”

The “Most-Favored Nation” policy calls for the US to pay the lowest drug prices of any developed nation, a full 180-degree turn from pricing today. The US pays nearly three times as much for prescription drugs as other developed nations, and three-quarters of Americans told KFF that medications aren’t affordable.

Trump said the discounts will roll out “almost immediately.” Drugmakers were urged to lower their prices within 30 days, at which time the government will decide its own price caps.

Behind-the-Counter Complications

Prescription drugmakers are taking jab after jab. Pharmaceutical tariffs are set to roll out within a week, while mass Food and Drug Administration layoffs have forced biotech companies to delay drug trials and tests. Big Pharma says the “Most-Favored Nation” plan could further hurt the industry’s profits and cut into their budgets for developing new medicines.

A USC study found that 70% of global pharmaceutical profits come from the US, and the US says that’s too much:

• The White House argues that pharma companies are too dependent on the US paying a premium. Trump said his executive order will stop the US from subsidizing other countries’ healthcare.
• Top execs of European drugmakers including Novartis and Sanofi have previously pushed the EU to allow higher drug-pricing to incentivize investment in the region. AstraZeneca said it’s already shifting some EU production stateside and predicted more will follow.

Part of the reason the US pays more is systemic. European governments that provide national health care negotiate with drugmakers directly, giving them more leverage to keep prices low. Meanwhile in the US, pharmacy benefit managers and pharmacies negotiate prices — and have been found to add a premium of their own to some drugs.

Multiple Treatments: Part of Trump’s plan calls for Health and Human Services Secretary Robert F. Kennedy Jr. to find a way for patients to buy drugs directly from manufacturers and bypass price-raising go-betweens. The private sector’s trying to solve that problem in its own way. Eli Lilly launched its own website last year, where people can buy Zepbound and other select medicines directly from the drugmaker. Before that, Mark Cuban’s Cost Plus Drugs platform promised to skip intermediaries and offer drugs to patients at lower prices.

Some educational tech platforms are falling behind as students increasingly embrace popular generative-AI chatbots and tools.

Chegg, an online education company that offers textbook rentals and homework help, said on Monday that it would lay off 248 employees, or 22% of its workforce, as part of a broad restructuring effort. It is also closing physical offices in the US and Canada by the end of the year and reducing new product development initiatives. The company cited “ongoing industry challenges” weighing on its business, including web traffic. It sued Google in February, alleging that its AI-search summaries were sapping traffic and revenue.

Chat-Smart

Booksmarts are out, and chat-smarts, in. Students are picking up tools like ChatGPT to skate through college, using it to write notes, produce essays, and do coding homework. Learning appears to be the last thing on the agenda for college students, as Chungin “Roy” Lee told New York magazine in a story published last week: “[University] is the best place to meet your co-founder and your wife.”

An analysis of 88,998 user reviews showed that education was the top use for ChatGPT’s Android app.

Meanwhile, funding for online education businesses has hit the lowest level in a decade, with businesses of that ilk receiving just $3 billion in investments last year, per a Financial Times article citing data compiled by PitchBook.

Chegg served as a virtual cheat code for homebound students during the pandemic, but lost its edge to popularized AI tools from Google AI’s Overview and OpenAI’s student-focused products and services. The company has struggled to compete even as it embraced AI; it rolled out a conversational learning companion, the GPT-4-supported Cheggmate, in 2023 — effectively replacing its shuttered live-tutoring service. But those efforts have yet to pay off in Chegg’s financials: Its first-quarter earnings report showed a 30% decline in revenue year-over-year and a 31% fall in subscribers. It is now in the thick of a strategic review, having tapped Goldman Sachs to explore possible options, including a sale or go-private transaction.

Not all ed-tech businesses are suffering because of AI:

• Online-learning platform Coursera beat revenue expectations for its first quarter, with management highlighting growth in its course offerings. Generative AI content and entry-level certificates were a big help.
• Language learning app Duolingo continues to grow and invest in AI. Its cofounder and chief Luis von Ahn recently said the company would be “AI-first” in a company-wide email. That involves phasing out contractors who do work that AI can do.

Reverse course: A dance with AI-first could drive companies back to real people. Klarna is now actively trying to hire human customer service agents after the Swedish fintech company found its AI chatbots wanting.