About an hour ago, President Trump did signal further progress in discussions with Iran, but, as we have expressed many times in our views, deception tactics are common in the Art of War, and it would be too easy if things were so straightforward.
Positioning is also at some 5-year extremes, which prevents participants from pushing for more, particularly given the current themes and trends.
On the bright side, however, Markets are receiving powerful fundamental backdrops from recent data.
Just last week, traders welcomed a stronger Non-Farm Payrolls report, confirmed by this morning’s lowest Jobless Claims in 5 weeks, pushing back against the weakening trends in the labor Market (206K vs 225K expected).
Good news for the economy, but less suitable for those thirsty for Federal Reserve cuts. To help with these cut expectations, however, last Friday’s CPI report came in softer than expected, now closer to 2% than 3% for the first time since 2021. Participants will be awaiting tomorrow’s Core PCE report before confirming the cooling. Exciting times are coming.
This also coincides with 74% of reporting Firms beating their earnings estimates—a very decent backdrop from the US Economy (despite growing imports hurting the GDP outlook).
Overall, the dynamics are challenging to deal with. So when they are tough to understand, there are some interesting dynamics to trade. Fade the extremes as long as nothing changes.
Take quick profits and losses, and get ready to act if the picture shifts. With volatility comes opportunity.
