Could the U.S.–China London Negotiations Mark the Start of a Summer Rally?

The current market shows clear signs of a strange bull run.Trade negotiations are slow,inflation remains unstable,and employment data is weak.The 10-year Treasury yield has exceeded 4.5% and continues to test its upper range,while the dollar remains soft.Signs of declining confidence in the U.S. are seen not only in these indicators but in the daily news as well.

Yet the stock market remains strong.The S&P 500 and Nasdaq are trading near all-time highs,with speculation that a new record could be set this week.Some attribute this to investor sentiment,but K3 Lab believes the deeper force is America’s growing strategic anxiety over a weakening dollar. To understand today’s market behavior, we must first ask what the U.S. truly wants.

The United States stands at a crossroads as a hegemonic power, and opposite that path lies China. The contest over future global dominance has begun in the form of tariff wars, and its impact is directly reflected in weak dollar conditions and high bond yields. This combination suggests a truth the market has already sensed: the U.S. is not yet ready to engage in a real confrontation—and that very hesitancy is why the market continues climbing despite uncertainty.

Trump’s vision of renewed American power centers on manufacturing,not finance. He sees a shift from Wall Street to Main Street, believing that industrial growth will reinforce the middle class, bolster national defense, and secure global leverage.If capital flows follow industry, the dollar strengthens and American financial dominance is restored.

But America is far from ready. Manufacturing infrastructure is underdeveloped. Supply chains remain disrupted. A weak dollar is pushing up import prices, and tax cuts are on the table—meaning more bond issuance and even higher yields. Prices rise, debt mounts, and confidence in the dollar erodes. The result is a weak-dollar, high-yield regime that reveals America’s current fragility.

In this state,the U.S. cannot risk escalation with China. A confrontation must come from strength—with inflation under control, capital flowing in, and alliances firmly aligned. The market knows this too. Itclimbs not from optimism but from the belief that the U.S. is stuck, unable to act.The recent coinage of “TACO” (Trump Always Chickens Out) captures this sentiment perfectly.

That’s why today’s U.S.–China talks in London matter.

Though the meeting may seem symbolic, the U.S.’s current constraints suggest a real breakthrough is possible.If any progress is made, China’s competitors—Japan, South Korea, Germany—will feel immediate pressure. They must rush to the table or risk economic isolation and tariff disadvantages. The ripple effect would be swift.

As more countries seek trade agreements, market confidence will rise and capital will flow into U.S. assets. The dollar will strengthen. Tariff stabilization would then give the Federal Reserve room to act, as even the Fed’s Vice Chair recently stated that rate cuts are possible under a stable trade regime.

A strong dollar, liquidity support, and tariff certainty would bring inflation under control and rebuild trust in American policy. This is the structure the U.S. wants to create—one in which it regains financial, industrial, and geopolitical dominance.

But the U.S.–China negotiations are not the goal. They are the trigger.

Today’s talks serve as a strategic inflection point, not an endpoint. They are meant to pull countries into America’s new orbit, reshape capital flows, and pave the way for the return of American dominance. If positive momentum emerges,markets will surge toward new highs. If not, a correction will follow.

Either way, markets are poised to react. And the U.S.—facing economic contradictions and geopolitical deadlines—can no longer afford to delay. What happens in London today may very well be the first move in a new era of financial warfare.