Weekly Risk Signals

The markets appear to be balancing back out after several weeks of firm risk-off leadership. Trade policy rhetoric is still changing almost daily and the possibility of a shrinking economy in Q1 is weighing heavily. The decision to dial back on QT is an indication that the central bank is worried more about slowing growth than inflation right now.

Even though Friday’s rally brought some much welcome relief for investors, this market is still being dominated by risk-off sentiment and further losses for equities. With utilities, gold and Treasuries solidly outperforming U.S. stocks last week, this is still an environment built on bearish sentiment and expectations that conditions are likely to get worse before they get better.

Nothing changes with this week’s signals, but sentiment remains firmly risk-off and investors seem much less inclined to take on risk in any form at the moment. The on/off nature of tariffs is making it nearly impossible for investors to position their portfolios and corporations to execute their strategies. I’d expect volatility to remain high as long as this trend continues, both up and down.