There has been a steady improvement in the mood in risk markets today and stocks are now at sessions highs, though still solidly negative. The S&P 500 is down 17 points after falling by as many as 66 points.
The change in mood comes as oil gives back some gains and 10-year Treasury yields retreat from 5.00%.
The news hasn’t changed but Trump has been tweeting non-stop and of it is leaning against the negative narratives in market:
- He said he won’t regulate AI and all that’s needed is a high-IQ President
- He said Russia and Ukraine agreed not to strike energy infrastructure
- He said the military conflict with Iran “will not be long”
Just now he also called AI regulation a scam and a hoax. He said “it will not be stopped” during his term. So that has tech stocks climbing.
The oil market isn’t sure there is any kind of deal between Russia and Ukraine because Zelensky has essentially denied it but I strongly suspect that Trump saw some midterm polling data today and didn’t like what he saw. He surely understands that the Iran war is unpopular and with the Houthis advancing, his position is worsening further.
What’s a bit scary to me is that Trump’s latest rhetoric is going down the same path as all the other ‘hoaxes’ he’s touted. That will mobilize a certain percentage of the population in that direction and ensures that if there are real risks, they’re not going to be confronted by the executive branch of the US government. That might be good for short-term stock market gains but whether its positive long-term depends on your view on the real AI risks.
In any case, I wouldn’t get too excited about any of these moves until after the FOMC on Wednesday.
We are getting a corresponding pickup in other risk trades including AUD, bitcoin and gold. The US dolalr has been steadily sold since the early US peak.
This article was written by Adam Button at investinglive.com.