Markets spent the past two months doing what markets often do when the world looks half-mad: they climbed the wall of worry, had a little look over the top, then remembered there was war, inflation, central banks, oil, politics, and plenty of nonsense still waiting on the other side.
So yes, risk appetite is still alive. But it is not exactly dancing on the tables. It’s more like I used to be after drinking one-too-many; telling everyone “I am fine”, while gripping the bar with both my hands.
US equities had a decent week, with the S&P 500 and NASDAQ helped again by the usual suspects: technology, AI, chips, and the general belief that America will always find another reason to buy its own market.
The NASDAQ still looks the stronger of the two, because that is where the growth money keeps hiding. The S&P 500 is broader, cleaner, and probably a little less excitable, but the message is similar: buyers remain interested.
Do I trust it completely? Not at all. The move looks constructive, but not bulletproof. When markets rise while there is so much uncertainty about, you have to ask whether investors are brave, clever, or just bored.
My suspicion? A bit of all three.
The FTSE 100 also pushed higher, helped by its usual defensive, international flavour. London’s market is not loved, but the FTSE has energy, banks, miners, defensives, and overseas earnings. In a world where investors are worried about oil, inflation, and geopolitical shocks, that is not a bad old bag of tools.
But make no mistake, if you are doing anything in the UK, you have to be very cautious.
In currencies, when the world gets nervous, money still runs to the dollar. People can grumble about deficits, politics, and debt all they like, but when the windows start rattling, they still reach for dollars first.
The euro is stuck in the usual European problem: They are trying to talk a good game, but if crude keeps pushing higher, the euro will struggle to look pretty.
Sterling also had a wobble as hopes of an immediate Middle East settlement faded. It has also had to deal with UK political noise, with speculation around Keir Starmer getting the boot adding another little stone in the pound’s shoe.
The pound is not collapsing. Let’s not get dramatic. But it is not exactly marching around with confidence either. It needs lower oil, calmer politics, and a clearer Bank of England path. At the moment, it has none of those in convincing supply.
Oil is the only market that matters right now. Not because traders suddenly discovered crude, but because the Middle East is once again sitting on the global inflation button.
The number to watch is $100. Not because $100 oil is magic, but because it is psychological. Above there, politicians panic, central bankers sweat, consumers complain, and bond markets start sniffing around for trouble.
Look, credit where it is due – don’t gag on your cornflakes – the Trump administration is doing very well. Those repeated suggestions that a deal could arrive quickly has helped stop the oil market from becoming a full-blown speculative bonfire. That matters. If traders believe peace could appear overnight, they are less likely to pile blindly into crude and force an even nastier upside spike.
Gold, meanwhile, is having a poorer time than many expected. War? Should go up. Inflation? Should go up. But higher rates and a stronger dollar?
Gold remains a long-term hedge, but short term it is not behaving like a clean panic trade. It is being dragged around by rates, the dollar, and positioning. So, it’s not easy.
Bitcoin is not acting like digital gold. It is acting like a high-beta risk asset. When liquidity is easy and tech is cheerful, it struts. When the dollar firms and geopolitical nerves return, it gets a little wobbly.
Trade it, respect it, but do not worship it.
The Gulf remains the big global concern. Fresh US action against Iranian targets has weakened hopes of an immediate settlement, even though talks are still being discussed. Markets are trying to price both war risk and peace headlines at the same time, which is like trying to drink whisky while riding a bicycle.
In Britain, politics remains a drag. The post-election pressure on Starmer, concern over fiscal credibility, and gilt-market nerves have not disappeared. Markets do not need Westminster to be brilliant. They gave up on that years ago. But they do need it to be stable. There is a difference.
So, what does all this mean for speculators?
The trend still favours risk assets, but the foundations far from solid.
US tech can keep leading, but it is vulnerable to rates. The FTSE still looks useful as a defensive grinder. The dollar has regained some safe-haven support. Oil is the danger trade. Gold is useful but awkward.
Bluntly: stay involved, but don’t get cocky. This is a trader’s market, not a believer’s market. Take profits when offered, respect stops and remember that one ugly headline from the Gulf can still ruin a very pretty chart.
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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