Weekly Risk Signals

Short-term sentiment remains positive in the near-term as trade tensions are relatively modest for the time being. As we saw over the past few weeks, I’m not sure the market is reacting quite as decisively to trade war developments anymore. While the greenback has rebounded a bit in recent days, it still seems to be having trouble moving higher.

The one takeaway from last week might be how in stride the market took recent trade developments. The VIX remained subdued and U.S. stocks traded within a relatively tight range. It seems that this could mean the market’s trade-related whipsaws over the past two months could be a thing of the past. The slow drift lower in Treasury yields last week could mark the return to some sense of normalcy.

Trump’s threat of tariffs against both Apple and the European Union put an end to what had been a nice little one-month recovery for U.S. equities. Pay attention to the bond market here because that’s going to tell us how much trouble the markets might really be in. We could be headed for a repeat of the situation where stocks, bonds and the dollar start all heading lower together.