The past week in markets wasn’t a serious rally, even if it has reached new highs. It was a performance — a badly acted one — where every participant pretended they understood what was happening while quietly praying nobody asked them to explain their positions. Markets aren’t moving because of fundamentals; they’re moving because everyone is terrified of being the last optimist in a room full of pessimists. That’s the real engine of price action now: fear of embarrassment.
Bond yields marched higher again, not because inflation data demanded it, but because the bond market has finally accepted what central bankers refuse to say out loud: inflation isn’t “sticky,” it’s structural. The US CPI print was boring, predictable, and meaningless, yet yields reacted as if Powell had announced he was retiring to a monastery. That’s cynicism in motion — traders no longer believe the data, the Fed, or the narrative. They believe only the chart, and the chart says rates aren’t going down anytime soon. Equities pretended to “absorb” the move, which is market-speak for “we’re too scared to sell but too delusional to buy.”
Tech stocks, the market’s favourite fantasy, spent the week discovering gravity again. The AI complex is finally showing cracks, not because the technology isn’t impressive, but because investors are realising that hype doesn’t generate cash flow. The market spent a year convincing itself that AI would solve everything from productivity to geopolitics. Now it’s slowly dawning on people that maybe — just maybe — the trillion dollar capex binge might not produce immediate miracles. As I keep saying, I have seen this movie before. It ends with analysts rewriting their models, CEOs blaming “macro headwinds,” and investors pretending they always knew the bubble would pop.
Europe, ever the obedient follower, mirrored US weakness with its usual blend of resignation and confusion. Bond yields rose, equities sagged, and policymakers continued to insist everything was “broadly stable,” which is bureaucratic code for “we have no idea what’s happening but we refuse to admit it.” The continent isn’t in crisis; it’s in denial. And denial is always the prelude to crisis.
The UK delivered its own brand of tragic comedy. Gilt yields punched above 5% after the Bank of England’s chief economist reminded everyone that stronger GDP means higher borrowing costs — a statement so obvious it barely qualifies as analysis, yet somehow enough to rattle the entire market. The FTSE reacted with its usual lethargy, mid caps tried to look attractive to foreign buyers, and the pound drifted like a boat with no anchor. The UK continues to be mismanaged, and there is no shortage of bad decisions being made by inept people.
WTI Oil finally stopped pretending it was a geopolitical barometer and fell under $80 again this week as Gulf tensions eased. The Strait of Hormuz reopening agreement removed the risk premium, and crude collapsed like a drunk being told last call has arrived. But don’t mistake this for stability. Oil traders are the most cynical people alive — they know peace in the Gulf lasts exactly as long as it takes for someone to get offended again. The next flare up will send crude right back into the 90s, and everyone knows it.
After the recent rally, gold behaved exactly as I expected: had a rest, then resumed its upward path.This is the market’s way of admitting it doesn’t trust the macro narrative. Gold is the asset class of cynics — it rises when people stop believing the story. And people are definitely stopping.
FX wise, the Euro is putting in a decent rally – I suspect more on the technical picture than anything else. It’s dollar weakness rather than Euro strength, because the Yen has also moved away from its embarrassingly low levels. Whether this short term weakness in the dollar persists, or it is just a correction is yet to be seen. But those mid term elections are getting closer and closer, and obviously, people have strong feelings about the potential outcome.
I suspect they are positioning for a world where volatility becomes the norm again, not because of data, but because nobody trusts the institutions running – or ruining – the show.
So what did the week really tell us? That markets – like our politicians – are still lying to themselves, to each other, and to anyone foolish enough to ask for clarity. The bond market is already repricing reality, even if they do correct every now and then. Equities are pretending they don’t see it. Commodities are confused. FX is bracing. And I am watching for what is coming: the moment when the market’s optimism finally collapses under the weight of its own dishonesty.
While this has been a week of decent movement, I consider it more of a week of revelation. And the revelation is simple: nobody really believes the optimists’ narrative anymore. They will go with it, but are ready to turn tail as soon as someone else points it out!
The markets remain open, blissfully indifferent to the wishes of our wives and their insistence that holidays must be taken. However, most of us have trimmed the size of our punts and are keeping our powder dry until the outlook becomes a little less murky and liquidity returns to the major markets.
I’ve still got another week before “her indoors” drags me away. Before she does, I’ll be looking to sell some grain and beans if they rally a little further, and perhaps pick up a bit of NatGas should prices soften from current levels. I may also be tempted to sell EURUSD if it pokes its head above 1.1780 before I climb aboard the aeroplane.
But, then again, trading while perched on the back of a camel in the middle of the desert doesn’t strike me as the most sensible way to spend the week with the old lady. Besides, a camel may be endowed with a hump—but who wants to be on holiday with a wife who develops one?
Please note the political opinions expressed above are those of the author himself, and do not necessarily reflect the opinions of JP Fund Services AS.
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