The 90-day cease-fire in the U.S.-China trade war added about $520 billion of market value back to Asia’s equity markets on Monday. Now, it looks like the party is over.

Here is where we are: Asian shares took a breather Tuesday, with the MSCI Asia Pacific Index coming off from an almost two-month high. Japan’s Topix closed 2.4 percent lower, ending its seven-day rising streak as investors took profits and the yen strengthened. Chinese shares fluctuated between gains and losses, and Hong Kong’s Hang Seng Index ended up rebounding after falling 0.7 percent.

The theories swirling around the short-lived rally in Asian stock markets include:

  • A lot could happen in 90 days and there hasn’t been much clarity past that. Pictet Wealth Management wrote in a Dec. 3 report that “the devil will be in the negotiation details.”
  • Some say investors are seeing a “sell the rally” strategy play out.
  • There was also the fact that Trump left his advisers scrambling on Monday to explain a trade deal he claimed he’d struck with China to reduce tariffs on U.S. car exports. This agreement doesn’t exist on paper and hasn’t been confirmed by Beijing, which has thrown some shade on the optimism.
  • We had an analysis piece about Chinese firms that are worried the U.S. trade-war truce could be short-lived.

What’s Next

This brings us to: what happens now? Without slanting the discussion one way or another, there are several things to watch our for. First, market turbulence is here to stay. In a research report published Monday, Societe Generale strategist Frank Benzimra said the trade truce is a positive development for risky assets, but future talks may not be smooth and that “opens the door for more volatility during the next three months.” That should be good news for traders.

Aberdeen Standard Investments fund manager Bharat Joshi is more skeptical. He recommends riding the wave available from this run-up in stocks, but that this won’t last long. “The recent gain from the truce between U.S. and China is more like a knee-jerk reaction, and I don’t expect that to help the overall global fundamentals going forward,” he said. “I would prepare myself to cash in in six months or so.”