Weekly Risk Signals

While the pause on many of the Trump tariffs may have soothed the worst fears of investors, it didn’t really do much to make the argument that we’re back on the upswing. The signals continue to indicate risk-off conditions. This is a market still dominated by volatility, which means there’s still plenty of downside risk.

What started off as firm risk-off sentiment in the middle of the week looks like it’s beginning to turn into a full-fledged retail investor panic. Friday looked like the wheels were coming off. If investors are scrambling to reposition their values, as the evidence suggests, the volatility might not be over soon. There’s still plenty more damage to be done in the credit market if we were to achieve levels that have historically indicated real trouble.

Given how the market has reacted negatively to every escalation of the trade war, Trump's "liberation day" could send the market lower again, especially if they come in more aggressive than expected. The last three days were firmly risk-off and I believe this sentiment is definitely in control. Treasuries are looking much stronger again and the confirmation by gold and utilities suggests that short-term risk is still tilted to the downside.