30.06.25 - Investors bet on trade deals

US markets are continuing their upward momentum as traders grow increasingly optimistic about the likelihood of trade agreements being finalized in the coming days. Despite the lack of substantial confirmed details, recent moves suggest positive sentiment. Canada, in an attempt to restart trade talks, has scrapped tariffs on major tech companies, signaling a potential thaw in relations after President Trump halted trade negotiations with the country last Friday.

Markets: US markets continue to outperform major indices while US yields are falling - Gold is up while cryptos are losing some ground - US dollar is weak while Swiss franc continues its uptrend

My view: The rally in US equities continues to be fueled by growing hopes of a swift resolution to ongoing trade negotiations. However, with the deadline fast approaching and limited concrete information available, I remain cautious. Market movements are currently driven more by speculation and sentiment than by confirmed policy outcomes.

At these elevated levels of pure optimism, markets become increasingly vulnerable and could react sharply to any negative news.

Even the SNB lowered interest rates to 0% in June, there is ongoing demand on the currency. The strength of the Swiss franc suggests some risk-off sentiment in global markets, potentially signaling a flight away from the US dollar. Investors may be beginning to question the sustainability of US household spending and the ongoing debate over the "Big Bill" in Congress, which could have significant fiscal implications.

In the short term, while there may still be room for upside driven by optimism, the risks surrounding trade deal uncertainties and geopolitical tensions should remain front of mind.
Additionally, I believe tariffs will persist, and investors may be underestimating the inflationary pressures that could arise, leading to upward pressure on interest rates in the near future.

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