Lord Fed's Gazette

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The Week Ahead
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The Week Ahead

Volume 132 - Trump's Imaginary Friends in Beijing

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Lord Fed
Apr 22, 2025
∙ Paid
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Markets rewarded conviction last week. My ES1 short, opened at 5473, is now trading over 250 points lower. Similarly, the gold call spread (GC 07/28), opened at $24, currently trades at $81 - I do plan to sell the spread this week. Both trades reflect precisely the environment I anticipated, risk aversion in equities driven by persistent (and growing) uncertainty. Both setups were shared in advance with paid subscribers. I talked about gold trading at $3,500 just last week!

The bid for gold is no longer purely defensive in my opinion. I am still holding the call spread as I expect we will see further demand from central banks. Interestingly, Beijing is allowing insurance funds to park money in gold. Downside risk for gold would be geopolitical risk easing, but for now, I believe the journey toward $3,500 will continue.

When both legs of the traditional 60/40 portfolio fail to hedge one another, gold reasserts itself as a diversifier.

Yet, stepping back from personal victories, we must acknowledge the broader reality of the market's deep structural impairment. Ever since the 90-day pause, the market has faced a resurgence of uncertainty. Liquidity remains thin, volumes are still lower, and the S&P top-of-book depth still hovers at ~$2mm. These conditions aren't bullish; they're the breeding grounds of sharp, mechanical reversals (in both directions).

I clearly signalled my scepticism shortly after the news of the 90-day tariff pause. It wasn't a resolution, it was purely an attempt to soothe market panic temporarily - all it did was reveal that all the White House cares about is China.

Despite aggressive short covering, which saw hedge funds undertake their largest net buying spree since July 2024, there's little evidence of genuine risk-taking - positioning remains clean. Systematic macro flows remain deeply bearish, reflected in historically low equity exposure. CTA positioning is decisively negative, suggesting they expect the downtrend to continue. The colour I am getting around CTAs is that they won’t be covering unless there’s a substantial shift in sentiment/direction - any modelled flows are likely wrong.

The situation hasn't changed - it's actually gotten worse. American tariff policies are still unclear, disorganised, and harsh, especially toward China. Beijing has responded in a quiet but calculated way, which shows that meaningful trade discussions aren't happening. Even though the Trump administration keeps making promising statements, there's increasing evidence that serious trade negotiations with China basically aren't occurring at all. At present, I think that this has been a colossal mess-up by the Trump administration, and I am not entirely sure they even have a backup plan. Any optimistic statements from Trump increasingly look like mere attempts at market appeasement, efforts which, notably, markets have grown increasingly immune to, as yesterday’s price action illustrated. Until we see concrete results, each time Trump blabs about progress with China, just picture him chatting enthusiastically with his imaginary friends in Beijing (and fade)


Single Stocks, Index & Vol - ~23% of S&P market cap reporting earnings this week.

For equities this week,

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