Latest news with #pre-Trump-era
Mid East Info
30-06-2025
- Business
- Mid East Info
Wall Street rallies as tariff fears ease and Fed boosts sentiment - Middle East Business News and Information
By Daniela Sabin Hathorn, senior market analyst at Equity markets have resumed their upward trajectory, climbing the proverbial 'wall of worry' despite persistent trade uncertainties and geopolitical tensions. Last week, Wall Street not only recovered all pre- and post-Liberation Day losses but also surged to new record highs, highlighting a resurgence in bullish sentiment across U.S. markets. Markets Price in Trade Progress: There appears to be considerable optimism baked into current market valuations. As we approach the critical July 9th deadline for trade negotiations, investor sentiment reflects expectations of progress on key trade deals—particularly between the U.S. and China. While these deals are unlikely to roll back tariffs to pre-Trump-era levels (when average tariffs were around 2–4%), a consensus around a universal baseline of ~10% seems increasingly acceptable to market participants. This anticipation of a 'better-than-expected' outcome, though not quite the ideal scenario, is fuelling confidence. Importantly, the framework agreement—mistakenly described as a deal by the Trump administration—regarding rare earths and technology transfer between the U.S. and China provided the necessary catalyst to push equities to new heights. Meanwhile, the temporary breakdown in negotiations between the U.S. and Canada added a layer of complexity, particularly around digital services taxation. However, this appears to have been more of a negotiation tactic than a fundamental breakdown. The Trump administration's strategy of 'flipping the table' seems to have been employed to extract concessions, a method that has so far yielded positive market responses. Bullish Signals Across U.S. Indices: Technical indicators further support the bullish narrative. The S&P 500 broke through to a new all-time high last week, accompanied by a strong bullish signal on the RSI. This movement was largely triggered by easing geopolitical tensions, even before the ceasefire announcement by Trump on Tuesday. Despite minor pullbacks midweek, the general uptrend remained strong. US 500 daily chart Past performance is not a reliable indicator of future results. The Nasdaq has followed suit, reflecting broad-based strength in U.S. equities. Positive trade headlines continue to act as catalysts, pushing markets higher in the absence of any major negative surprises. In contrast to the U.S., European equities have struggled to regain their bullish footing. Indices such as the DAX 40, STOXX 600, and FTSE 100 have shown muted reactions, failing to match the momentum seen stateside. This disparity may stem from lingering concerns over trade negotiations between the U.S. and the European Union. President Trump's comments over the weekend reiterated the EU's difficulty as a negotiating partner. Although a breakdown in talks is not expected, there remains a real risk. As with other negotiations, Trump may employ pressure tactics to gain leverage, creating short-term uncertainty in European markets. Fragile Peace in the Middle East: While markets have largely moved past immediate concerns related to Middle East tensions, the situation remains fragile. Any escalation could act as a negative catalyst, though current sentiment suggests that investors are more focused on the opportunities from trade resolution. Meanwhile, another encouraging development came from the Federal Reserve's latest stress test results. Data released on Friday showed that all 22 U.S. banks passed the test, indicating they would remain resilient in the event of a 2025 recession. This strengthens investor confidence and adds another layer of support to the equity rally. Week Ahead: In summary, the path of least resistance for equities appears to remain to the upside. The combination of easing trade tensions, resilient economic data, and strong technical momentum supports continued bullishness. As always, risks remain—particularly around unresolved trade negotiations—but the market's current positioning suggests optimism is prevailing. Markets are likely to focus on the release of the US jobs data on Thursday (a day early given the 4th of July holiday on Friday). So far, the US economy has shown resilience, limiting the Fed's ability to cut rates, but the latest readings have shown softening inflationary pressures and job creation, allowing markets to continue to price in two rate cuts for the remainder of the year. The data this week is unlikely to skew this belief, likely reinforcing the appetite in US equities.
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Business Standard
14-05-2025
- Business
- Business Standard
Gold outran equities in the last one year, but the rally may be over for now
Global gold prices have rallied an impressive 36 per cent over the past year, outperforming most major global equity indices and hovering near five-year highs. This surge has delivered nearly three times the returns of major US indices, with the S&P 500 returning 12 per cent and the NASDAQ 13.5 per cent in the last one year. Over a five-year horizon, gold prices in international markets have risen by 87 per cent. However, despite this strong performance, gold has still underperformed US equities in the long run. During the same five-year period, the S&P 500 and NASDAQ rose by 105 per cent and 110 per cent, respectively. Looking ahead, the short-term outlook for gold appears less optimistic. Gold prices are likely to stagnate or even decline by 5 per cent to 10 per cent over the next year, as it potentially underperforms global equities. Investment flows may also shift accordingly, with global funds likely reallocating a portion of their holdings in Gold ETFs to US equities. The performance of US equities is expected to benefit from favorable trade agreements. Regardless of the final terms, any trade deals the US signs are anticipated to support its economy. Even if the US makes significant compromises, it is unlikely to revert to pre-Trump-era import duty levels. Given the unsustainable trade deficit of over $1 trillion annually, future trade deals are expected to have a net positive effect on the US economy, thus favoring equities over commodities like gold. The progress seen on US-China trade talks - at least for now - is another positive development for global markets. A de-escalation in trade tensions between the world's two largest economies could reduce the risk of deflation globally, prompting investors to favor equities over traditional safe-haven assets such as gold. Furthermore, aggressive interest rate cuts by the US Federal Reserve (US Fed) now seem unlikely. A resolution to the trade conflict would reduce deflationary pressures in both the US and China. In fact, higher import duties could push inflation upward, making consumer goods more expensive and discouraging further rate cuts. Persistently high interest rates in the US are a bearish signal for gold, which tends to perform better in low-interest environments. Geopolitical tensions ease Geopolitical tensions, another key driver of gold prices, also appear to be easing. With signs of stability on the India-Pakistan border and ongoing peace discussions between Russia and Ukraine, the global risk premium may decline—further dampening demand for gold. Central banks in the US and Eurozone already hold substantial portions of their foreign exchange reserves in gold—75 per cent and 56 per cent respectively. With no strong incentive for further aggressive accumulation, central bank demand for gold is unlikely to increase significantly. Additionally, the sharp rise in gold prices—up over 87 per cent in five years—could spur increased mining activity and recycling. Investors who purchased gold five years ago may now be tempted to liquidate some holdings and reallocate funds to other asset classes, potentially weighing on prices. Such a steep five-year rally is rare, suggesting the recent surge may be nearing its end in the short term. Long-term prospects remain positive Despite the expected short-term weakness, gold's long-term outlook remains stable. Over the next 12 to 18 months, prices may stagnate or decline modestly. However, beyond that, gold could regain its appeal, particularly as global economic dynamics evolve. The US is also applying pressure on efforts to develop alternative global currencies. BRICS nations, for example, may scale back their ambitions to create a common currency due to fears of retaliatory tariffs from the US As a result, these countries might continue allocating a higher proportion of their forex reserves to gold, rather than parking funds in rival currencies or even in those of other developed nations. In summary, while gold has delivered stellar returns recently, its momentum may slow in the near term due to macroeconomic shifts, policy developments, and easing geopolitical tensions. Nevertheless, its role as a long-term store of value remains intact.
