Never look back unless you are planning to go that way. - Henry David Thoreau
On a day like today, it almost feels like spring is right around the corner.
Markets Overview:
Feels like Market pricing “Goldilocks continues” scenario with high confidence. Asymmetric risks in BOTH directions (stronger growth + stickier inflation OR geopolitical shock) are underpriced. Just sayin’
Fed paused its easing cycle, holding rates at $3.5%-3.75%, citing a “clearly improving” growth outlook despite elevated inflation.
Equity markets reacted with a tech-led divergence; the S&P 500 briefly touched 7,000, Dow fell on healthcare weakness.
Geopolitics remain the primary tail risk, driven by the recent removal of the Maduro regime in Venezuela, tensions over Greenland, and escalating tensions with Iran.
Thematically continue to focus on ‘multipolar pivot’, with U.S. unilateralism (e.g., Iran threats) pushing allies toward alternatives like China and regional blocs.
Iran’s drone buildup and Russia’s mediation efforts suggest a deterrence strategy to avoid direct conflict, but escalation risks oil supply disruptions (Brent up 1.7%) and broader MENA chaos.
Eurasia’s realignment could foster trade corridors but heightens competition with Russia/China.
Overall, geopolitical risks are elevating safe-haven assets (gold >$5,500), with potential for volatility if U.S.-Iran rhetoric turns kinetic. Probability of wider conflict remains low, but persistence in tensions favors defensive positioning.
Fed’s pause (no cuts signaled) supports equities but pressures rate-sensitives; markets priced in stability, with VIX ~16 indicating complacency.
Rotation evident: from tech to cyclicals/defensives amid uncertainty. Bullish outlook (S&P +10-25%) hinges on earnings/AI, but geo risks (Iran) could spike volatility; 35% recession odds temper optimism.
Geopolitically, a few areas to watch:
Escalation: Ukraine, Taiwan, Middle East - multiple powder kegs
China Economic Slowdown: Property sector, demographic challenges, implications for global growth. “The Deflation Doom Loop Trapping China’s Economy”
(WSJ)US Political Dysfunction: Midterm uncertainty, debt ceiling theater, policy paralysis
Rest of world continues to outperform SPX
Dollar weakness (Trump-endorsed) fuels debasement trade, boosting commodities/metals. Expectations for a dovish Fed Chair to replace Powell adding to concerns.
“A Weaker Dollar Has Always Been Part of Trump’s Plan”
(Rtrs)
“Exclusive: US moves away from critical mineral price floors, sources say” (Rtrs)
Is Oil finally breaking out?
Brent
Energy names are way ahead of the commodity. Will they rally with crude prices, or priced in?
FOMO and ‘you gotta be in it to win it’ driving retail participation in investment vehicles; seeing it in intraday volatility and sharp moves in meme or ‘hot names’ (silver comes to mind lately)
YTD!!
