Weekly Risk Signals

Short-term conditions have swung back to risk-on, which is consistent with the current narrative that peak trade war worries have topped out and there might actually be an opportunity for a rebound with any further easing. The data from the past week, however, tells a different story. The combination of GDP and the PCE price index has a very stagflationary look.

Last week marked a de-escalation on the geopolitical front that fueled a relief rally for both stocks and bonds. Most of the signals, however, are still indicating risk-off conditions. Volatility is still modestly elevated and we’re entering the period where the hard data is going to start indicating where we really are. I think gold is becoming one of the most dangerous assets in the market right now.

I don’t think the narrative has changed that we’re still in the midst of a correction phase marked by higher volatility and a sustainable upside catalyst. Treasuries are at least beginning to stabilize here and showing signs of resuming their traditional position as the risk-off asset. As that continues, I expect we’ll see some of the interest in gold migrate back over to Treasuries.