As we inevitably get closer to a cease-fire and end of hostilities in Ukraine, the markets will have to go through a period of rebalancing and reassessment.
This week we have seen both Gold and digital gold (Bitcoin) drop handsomely. These, along with the price of oil, are all products that see their prices rise when global risk increases.
Of course, it is too early to determine exactly how and when this peace will come about, and what the cost will be, especially for the West. But under the massive influence of the Trump administration, we are vastly closer to a peace deal than we were just a few weeks ago, and this can only be a good thing.
And talking of good things: a few weeks back we discussed taking on the equity bulls and going short of both DJIA and FTSE, which, although it was a difficult call at the time, is now paying dividends. That said, I am not overly confident that the high is now in place, and there is a possibility that we might see one more rally over the coming weeks. But if this rally does occur, I would be looking at it as an opportunity to add to my short positions.
There will be a lot of water flowing under the bridge before peace is concluded, and we don’t know what the negotiations will involve. But we should expect this peace will come at a financial cost, especially for the EU.
It is hard to know what the true situation is because of Western in-fighting and media propaganda, but I am confident that America will get a lot more from these peace negotiations than Europe. And with Trump eyeing much needed rare-earth concessions, this material will be massively beneficial for the USA and its digital ambitions.
When it comes to digital ambitions, I note with some hilarity that both the EU and the UK governments have earmarked billions from the taxpayer to fund AI development. I don’t want to piss on anyone’s cornflakes, but surely European development of AI should be attractive enough for those involved to raise money from private investors? If taxpayers are going to fund the development of AI, the question I have is: How much and when will the taxpayer see a return on this “investment”?
Let’s be perfectly honest, the amounts European governments are pumping into AI are dwarfed by the money invested by the likes of Meta and Google, and when we see how relatively cheaply the Chinese created Deepseek, Europe is well behind in development, and taxpayer funding is not going to change a thing, other than increase the bank accounts of a few bureaucrats in Brussels!
C’mon, we all know that if Musk was unleashed in the offices of the EU, heads would roll.
We are currently seeing an attempt at pushing European currencies higher against the dollar, but in my opinion, these corrective rallies are simply going to provide us with the opportunity to go long of the dollar at decent levels. American debt is without doubt massive, but finally, they have an administration which is trying to stop the waste and address the problem. Whereas Europe is a massive ship, so it will take a long time to turn things around. And if that doesn’t happen, it will sink like the Titanic.
My biggest fear is for the UK, and the direction the current government is taking it. Make no mistake, what was once the world’s greatest empire is rapidly drifting towards the land of insignificance. I remember the terrible years of the 1970s, when the UK was known as the “poor man of Europe”, and from my observations, the UK is in a worse shape today than it was 50 years ago.
As I stated earlier, I am short of FTSE, and I am simply waiting a little longer before jumping in and selling sterling. Obviously, it hurts me to have this opinion of my homeland, but I have to call it as I see it. Politically and fiscally, the UK is going in the wrong direction, and I cannot see things improving in my lifetime.
Finally, in the commodity arena, we have done quite well recently, taking advantage of the rallies in numerous raw materials. While I am reluctant to go short of commodities, I do feel we will see various markets come under pressure over the coming month. I will be looking to buy on very good dips, but if you are feeling brave, shorting non-ferrous metals might prove profitable over the coming weeks.
That’s about it for this week. Whatever positions you take, good luck, I hope they pay off!
The post Are we going to see the risk premium downgraded? first appeared on JP Fund Services.
The post Are we going to see the risk premium downgraded? appeared first on JP Fund Services.
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