At the Precipice of Purgatory
The Week Ahead - Volume 134
My apologies for the Week Ahead coming on a Tuesday - it was a bank holiday in the UK yesterday.
Markets stand at a critical juncture as we approach the FOMC decision on Wednesday. Complacency may have set in, so underlying risks persist. I continue to hold my July gold call spread (3100/3200) (paid 24, now 80). This position remains strategically relevant amid persistent uncertainty.
FOMC Outlook: Data-Dependent
The Fed will hold rates where they are, echoing their cautious “wait-and-see” posture. Powell will likely emphasise patience, stressing that they are data-dependent and need clarity from economic indicators before further policy shifts. The labor market resilience continues to give the FOMC room to maintain its restrictive stance without urgency to cut.
Single Stocks, Index and Vol- Market Dynamics: A Moment of Indecision
Equities have put in an impressive run recently, but there's a notable hesitancy beneath the surface. Hedge funds remain lightly positioned, and despite last week's notable market moves, broad conviction appears limited. There’s somewhat of a pervasive uncertainty, markets are delicately balanced between breakout potential and genuine caution. Indeed, substantial short-covering and technical factors have driven much of the recent market strength, rather than a wholesale shift in fundamental conviction. But the question I keep asking everyone is - what’s changed? I don’t ever seem to get much of a response… Everyone I talk to is bearish yet lacks reasoning. The most reasonable answer I have got has been one to do with technicals - saying that, even that answer was lacklustre, “outside the range I had predicted”.
Systematic strategies are positioned at historically low levels on equities exposure after the brutal volatility shock in recent months.