Markets march on
Despite all the adverse headlines, conjecture and uncertainty, equities continue to push ahead. European equities were boosted by the likelihood of a 15% tariff agreement landing within the next few days. Even with the wrangling around the Federal Reserve and its Chairman, the US market performance has been remarkable.
In the UK, the FTSE 100 continued its momentum, nudged along by the signing of the UK/India trade deal.
I’ve written about the VIX index in the US before, which is a measure of volatility. At the moment, it is very low in contrast to the index back in early April. It is now the lowest it has been since February this year which has prompted some traders to pick up cheap call options betting on increased volatility to come. I suppose the mantra is “when everything is going well, prepare for something to go wrong”.
It’s not just European equities that have had a good week. Global equities rose on the back of optimism that the US is looking to agree trade deals. An agreement was reached with Japan on Tuesday, and it is expected that Europe and South Korea may be next. The markets seem to have got their risk appetites back in anticipation that the US’s rhetoric is not backed up with the same veracity in real life.
In the US, markets have been buoyed by recent resilient data but underneath the bonnet, more sectors are experiencing job losses than gains which is a rarity outside of recessions.
A sign of the times is that the London Stock Exchange discussed whether to extend hours amid increasing demand from small investors.
This week’s content:
- EU tariffs close to being agreed
- Is it time to hedge?
- Global equities have a stellar run
- Under the bonnet of US optimism
- Extended hours for London Stock Exchange
- Summary
EU tariffs close to being agreed
European indices rose as sentiment improved around the possibilities of the US and European Union doing a deal.
It appears 15% is the expected agreement, only a small increase from the 10% levy that has applied since Liberation Day. In response to the threats from Trump and the administration, the EU has been preparing its own retaliatory trade package. Anyway, let’s see what happens, but the markets seem to like what’s unfolding.
Is it time to hedge?
We are always considering the downside risk, and it follows that when markets have enjoyed a good run, they are most vulnerable. As an article in Bloomberg this week stated, “when everything’s going right, it’s time to prepare for something going wrong”.
Having made lots of money from markets marching forward, traders are starting to encourage their clients to buy cheap hedges against potential losses in US stocks. “If you are nervous, the market is making it very easy to rent hedges” Goldman Sachs trading desk wrote in a note to a client this week.
Continues…
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