Weekly Risk Signals

The equity market continues to ride the current wave of momentum, fueled by relative calm on the geopolitical front and the potential pull-forward of the Fed’s rate cutting calendar. Bonds have been rallying on this belief that the Fed could cut rates sooner rather than later, but not necessarily in a risk-off way. The dissension happening within the Fed right now is likely to be the big story over the next few weeks.

A lot of market trends have been in place for several weeks now. The markets, however, may move this week based on the U.S. attacks on Iran and any potential repercussions. Geopolitical risks have already been heightened, which has added some volatility to the risk asset markets, but U.S. involvement in the Israel/Iran conflict is likely to increase volatility further, at least in the near-term.

The signals remain mixed. Short-term sentiment continues to be positive, but the longer-term is a little less bullish. The Israel/Iran conflict created a bit of a market shock, but more so in the energy sector than anything. I’m not sure this war will be much more than a short-term event. It’ll probably cause some volatility for now, but I don’t think it’ll last long before we move on to the next thing in the news cycle.