The latest inflation numbers published on Friday afternoon came in higher than expected. The core personal consumption expenditures (PCE) price index rose 0.4% in February, above economists' 0.3% forecast. This pushed the 12-month inflation rate to 2.8%, exceeding the projected 2.7%.

At the same time consumer spending increased 0.4%, below the forecast of 0.5%, while the personal saving rate reached 4.6%, its highest since June 2024.

Markets: Markets left the week in deep red zone. The Nasdaq index down on Friday 2.6%, lost another 0.5% more in the after-hours trading; US 10-year yield down to 4.24%, gold with new all-time high at USD 3’086 per ounce. Global stock markets and cryptos joined the sell-off. Cryptos continue today trading lower.

My view: It is not a surprise that latest economic data was not well received. Investors are increasingly concerned about potential stagflation, where inflation remains persistent despite slower economic growth.
If upcoming US data continues to signal stagflation/recession, markets are likely to shift further into defensive positioning and risk-off mode. Let’s do not forget, investors recently added risk by increasing the equity exposure in their portfolio while buying the dip. That new allocation is already in minus.
My current positioning, however, is holding up well. I always maintain a core equity allocation, but I have been scaling back long-term positions gradually since the start of the year. At the same time, my short positions built tactically over that period are now paying off, helping keep my portfolio solidly in the green, despite the broader sell off.

Funds recorded substantial inflows last week, marking a new milestone. According to a Bank of America survey, global funds attracted approximately USD 43.4 billion in assets over the five trading days. The bulk of the growth was driven by U.S. markets, while European equity funds saw record-breaking inflows of USD 4.3 billion - the highest on record.

Markets: Today, markets remain broadly under pressure, with widespread weakness across stocks, bonds, and cryptos. The only bright spot is commodities, where gold and industrial metals are showing gains.

My view: It is very interesting to see that a large crowd, including major investment houses, jumped in to buy the dip - after all, it is a strategy that worked well for a long time. However, those who follow my commentary know that I have consistently taken a different stance. I have made it clear that I do not share this view and will not join the mainstream this time.

Holding a contrarian view in moments like these is not that easy, but it is a key ingredient in successful investing. Staying true to your own perspective and strategy, even when the noise is loud and the crowd is moving in the opposite direction, often makes all the difference.

Since I began regularly sharing my views here on Market Insights, the market has largely moved in line with my expectations. This approach has well paid off in my portfolio, especially during periods of heightened volatility and when major indices are even trading in negative territory.

Stock markets remain highly volatile. Following a recent correction - defined as a 10% decline from the recent peak - in US indices such as the Nasdaq and S&P 500, markets have rebounded modestly over the past several days. Yesterday, the markets added slight more gains, albeit on lower trading volumes.

Investors continue to seek clear guidance amid ongoing uncertainty. The latest consumer sentiment report this week, highlighted persistent weakness, reflecting growing concerns over economic conditions. Investors are now turning their attention to today's release of the U.S. durable goods orders report, hoping it will provide further clarity on the state of the economy.

Markets: today US futures trading sideways. Europe stocks continue to decline, interest rates see some more pressure on the upside. gold stable above the USD 3’000 level, cryptos with small gains.

My view: With trading volumes diminishing, the recent market rally could quickly run out of steam. Could this signal a “bull trap” - a scenario longtime not seen, in which prices temporary rise, encoring investors to buy, anticipating bullish momentum to continue, subsequently turns out to be temporary or false.

My perspective remains contrarian. I remain cautious about buying into this dip while strategists from prominent investment houses advising clients to accumulate stocks at current levels, even on high number of uncertainties. Numerous geopolitical and economic concerns persist: a ceasefire between Russia and Ukraine remains far away, tensions in the Middle East tensions seem to re-escalate, and looming US tariffs add further instability. In Germany, following recent elections, there was an agreement on a new debt package aimed at infrastructure projects and military aid. However, practical implementation will require significant time, and the formation of a governing coalition has yet to be finalized.

US indices see a bounce today, driven by rumors of softer stance on tariffs from the White House. President Trump may impose fewer tariffs and should spare certain sectors from tariffs on April the 2nd.

Markets: US markets rally led by tech stocks, with Nasdaq up towards 2% while major stock markets in Europe and Asia continue to struggle. Interest rates see an uptick, USD slightly stronger while investors take some profit on gold. Crypto prices with an upswing.

My view: The rally was initiated by cryptos already late Sunday evening with some investors taking the risk to buy risk assets and play this rumors. Even my tactical allocation does not mirror today’s market move, I do not follow such speculations and keep a certain cautious stance as a high number of uncertainties remain (global tensions with re-escalation in Middle East, Russian war, German government formation, trade war etc.)

The Federal Open Market Committee (FOMC) left the fed funds rate unchanged, as expected. The Fed indicated they see half a percentage point of rate cuts for 2025, which typically means two reductions.
At the same time, the central bank lowered its projection for US economic growth in 2025 to 1.7% from 2.1% in December, while raising its inflation outlook to 2.8% from 2.5%.
Furthermore, the committee announced to slow the pace of the quantitative tightening, reducing the pace of shrinking its balance sheet by selling bonds.

Markets: US markets jumped with Nasdaq closing the day up 1.3% while S&P 500 Index gained 1.08%. The 10-year Treasury fell down to 4.23% from 4.3% while short rates were going north. USD declined while gold price saw an uptick.

My view: I was surprised investors reacted so positively to the Fed's statement, given that the economic outlook appears less favorable and uncertainties about the impact of tariffs persist. Investors seem unconcerned about the increasing probability of an economic downturn and the potential escalation of the trade war. As a reminder, the next significant tariff announcement is scheduled for April 2nd.

My view on interest rates remains consistent: there is room for rates to decrease, particularly on the longer end. This outlook applies to Europe as well, with the recent spike in interest rates during March following Germany's announcement of a EUR 500 billion debt package.

Therefore, I continue to maintain my long-term Treasury position, established when the 10-year yield reached 4.8% back in January.

Regarding equities, I retain a cautious stance, even after the recent market correction.

The market is widely expecting the US central bank to keep interest rates unchanged at its upcoming meeting today. However, attention will focus on Chairman Jerome Powell's comments amid rising concerns over economic confidence. These concerns have intensified due to President Donald Trump's escalating trade disputes and tariffs, increasing fears of potential stagflation. The Fed's statements on these economic challenges will be closely watched for reassurance and guidance.

Markets: US interest rates are moving sideways during recent days with the 10-year Treasury yield hovering around 4.3%; gold above USD 3’000 continues the uptrend; US dollar continues to decline against major currencies

My view: Given that recent inflation figures and consumer expectations remain significantly above the Federal Reserve's target of 2%, there's currently no room for an interest rate cut. Investors appear overly optimistic, anticipating hints of potential future rate cuts in today's Fed statement. However, the economic situation remains uncertain, particularly considering the unclear impact of tariffs on economic growth.

Political uncertainty continues and may even intensify, particularly with the upcoming second and major round of tariffs scheduled for April 2nd. This could further increase market volatility and elevate recession risks.
Should a recession occur, it is likely that US president Donald Trump would place blame on Fed Chairman Jerome Powell for not proactively lowering interest rates beforehand.

Under such a scenario, the stock market faces additional downside risk, potentially triggering a further correction with spillover effects on European and Asian markets. Long-term interest rates could decline further, whereas short-term rates might experience upward pressure.

A European company announced this morning ambitious targets for 2025, aiming for a year-on-year revenue increase of at least 40% and an adjusted EBIT margin exceeding 20%. Based on its previous year's revenue, the company projects EUR 60 million in revenue for 2025.

In 2024, the company achieved revenues of EUR 41.7 million, up from EUR 38.1 million the year before. Despite these positive growth figures, the company's current market capitalization stands at over EUR 1.3 billion.

60 million revenues vs. EUR 1.3 billion market cap!

The company is Steyr Motors AG, engaged in the defense sector, currently en vogue. The company is a manufacturer and distributor of diesel engines for heavy-duty vehicles, boats, and generator sets.

Markets: German DAX Index is pushing toward all-time highs, driven by news of a debt-financing package aimed at stimulating the economy and bolstering military defense efforts.

My view: To put this numbers into perspective: if Nvidia were valued at similar revenue-to-market cap multiples, its share price would be around USD 249. However, Nvidia’s share price is trading around USD 120 this afternoon.

While Steyr Motors AG benefits from operating in the currently booming defense sector, this valuation appears overly speculative. The stock of Steyr Motors is bought blindly without raising concerns about its valuation, just on hope to benefit from current rally.

Stay away from such speculations. The recent surge in defense stocks and European markets seems to be heavily reliant on optimism and capital inflows, much of it likely reallocated from US stocks. Valuations appear unsustainable without corresponding fundamental growth.

The latest US consumer survey, released last Friday, indicated sentiment at its lowest level since 2022 and below market expectations. According to the survey, the consumer sentiment index posted a mid-March reading of 57.9, a 10.5% decline from February, falling short of the consensus forecast for 63.2. At the same time, the one-year inflation outlook spiked to 4.9% (4.4% expected), marking the highest reading since November 2022.
Meanwhile, today’s retail sales data for February revealed modest growth of just 0.2%, also missing expectations of an 0.6% increase.
In contrast to the disappointing economic data from the US, recent figures from China have notably more positive and encouraging. China’s industrial production grew by 5.9% in February (5.3% expected). Consumption also demonstrated signs of acceleration, with retail sales rising by 4% year-on-year (3.8% estimated) in the first two months of the year.

Markets: US markets saw a bounce after briefly entering a correction territory (decline of 10%). China stock markets continued their upward trend.

My view: In the United States, consumer spending is by far the biggest driver of the economy, with personal consumption expenditures accounting for nearly 70% of the nation’s GDP. Consequently, if the consumer sentiment remains subdued, the likelihood of the US entering a recession increases significantly.

If a recession in the US materializes, further downside in US markets is likely, potentially triggering spillover effects across global markets.

Given the elevated risks, even after the recent market decline, I am cautious about aggressively chasing opportunities. Having taken broad-based profits, including from some long-term investments in recent weeks, I remain highly selective about new purchases. My tactical positioning remains unchanged: staying short on selected US tech stocks and semiconductor sector, while maintaining a long stance on Chinese internet stocks, which continue to represent my preferred region.

Should Chinese markets experience a pullback in the coming days, I may further increase exposure in this area.

Recent data indicates softer inflationary pressures, as the U.S. consumer price index released on Wednesday rose only 0.2%, slightly below analysts' expectations of a 0.3% increase. Today's published wholesale prices remained flat, further signaling easing price pressures in February.

Despite this positive inflation data, investor sentiment remains cautious, prompting shifts in portfolio allocations toward a recession-focused outlook in the U.S. market. This is reflected in recent sector performance trends, with technology, financials, and consumer cyclical stocks experiencing declines, while sectors such as energy, consumer staples, and utilities gained momentum.

Meanwhile, geopolitical tensions remain elevated, with Russia recently rejecting a proposed 30-day ceasefire in Ukraine.

Markets: global stock markets decline on a broad base, interest rates trending sideways, US dollar gains back some ground following recent losses, gold with new all-time high, cryptos sideways trending to losing ground.

My view: Following recent heavy losses, including Monday’s sharp decline - the worst since 2022 - markets tried to claw back some ground yesterday with a modest recovery. However, the rebound lacked certain strength, signaling to me a potential risk of further downside.
Currently, technical indicators provide little support for a sustained market recovery. On the contrary, technical strategies increasingly suggest downgrades. At the same time the investors sentiment remains on “extreme fear” level, an unusual persistence lasting over two weeks already. Typically, such extreme sentiment is short-lived and acts as a contrarian indicator, presenting buying opportunities. Current market conditions are definitely different, fueled by high number of uncertainties. With the Ukrainian war and trade war to continue there is not much evidence that markets should calm down and investors gain back some confidence in the near-term.

I believe the recession scenario should be taken seriously, as the probability is clearly rising.

In the ETFMandate portfolio I further reduced my overall equity exposure by taking selectively profit on European stocks together with tactical short-term investments and by adding only few positions with a long-term investment horizon.
My exposure to the financial sector has now been significantly decreased, approaching nearly zero. After previously exiting all positions in US financial stocks, I have recently reduced exposure to European banks and insurance companies over the past two weeks. For the time being, only select UK financial holdings remain in the portfolio.
In addition, with the recovery move yesterday, I re-opened the short call on semiconductors via a short ETF.

In recent years, private equity has gained significant traction as an attractive investment option, driven by an extended period of historically low interest rates and subdued returns from traditional asset classes. Initially accessible and favored by institutional investors, private equity has increasingly become accessible to private investors as well, drawn by the potential for higher returns.
Private equity offers distinct characteristics, including: illiquidity, leverage, limited transparency, higher fees, long-term investment horizon, potential of higher returns.
This combination of higher return expectations for investors and attractive fee structures for banks has created a compelling win-win scenario, making private equity an increasingly popular component of diversified investment portfolios.

Markets: Volumes in the private equity market have grown significantly in recent years, driven by strong demand, fueled by the performance and return potential. As a result, private equity firms have raised substantial amounts of capital, creating considerable pressure to identify and pursue attractive new investment opportunities.

My view: I always aim to think ahead and proactively prepare for potential market scenarios. Currently, the market is not yet in panic mode, as illustrated with my last comment on Market Insights “Recession fears”. However, if the current sell-off continues, it could trigger a cascade effect involving stop-limit orders by technical indicators and margin calls, leading to increased downward pressure and possibly leading to a short-term market collapse.

Private investors, particularly those advised by banks, remain significantly invested in the tech sector. Should market sentiment deteriorate further, fear could prompt these investors to reduce exposure to limit losses or secure profits, significantly increasing the supply of shares in the market.

Several factors are converging to create heightened uncertainty, including recent political turmoil and an increasingly unpredictable economic trajectory. Additionally, the market currently has a substantial population of speculators lacking deep market experience, who until now have consistently relied on buying dips. This strategy, effective during recent years, is now failing to yield the same results, with many speculators rapidly exhausting available capital. Consequently, the diminished buying power could substantially reduce market demand.

This scenario, characterized by increased supply and dwindling demand, poses a tangible risk of further stock price declines, potentially escalating into a market crash.

Notably, private equity has yet to experience a genuine financial storm. The brief market downturn during the covid pandemic quickly reversed within a matter of months, and thus does not represent a true crisis scenario. However, the current situation seems fundamentally different. If negative momentum intensifies, the likelihood of a significant market crash grows considerably.

Given private equity's inherent illiquidity, simultaneous investor withdrawals could amplify market stress, potentially leading to systemic consequences like of a house of cards collapsing, adversely impacting private equity portfolios and financial institutions alike.

Although this is not yet my primary outlook, it has become a critical scenario I actively consider in my investment decision-making process.

The market sell-off is intensifying, driven by deteriorating investor sentiment. Fears of a recession have resurfaced following recent political turmoil, though in the US, current economic data do not yet indicate such a downturn.

Markets: Global stock markets are firmly in the red, extending losses from Asia through Europe to the US, where the Nasdaq is currently down 3.3%. Interest rates remain broadly stable, gold prices show little movement, and commodities are mostly lower. Cryptocurrencies experience significant losses, with Bitcoin falling below USD 80’000. Meanwhile, the Swiss franc has lost some ground against major currencies.

My view: The sentiment index continues to indicate an "extreme fear" level; however, I do not see markets yet in panic mode. Correlations among equities and across various asset classes have not yet converged towards 1, a scenario typically observed during periods of intense market stress when investors indiscriminately sell risk assets and rush into cash, causing all asset classes to move in the same direction. However, volatility continues to rise as expected.

With recession fears coming back, sector rotation can be observed, from the cyclical to more defensive sectors such as energy, consumer staples and utilities. With the exception of utilities, my portfolio has a larger allocation to energy and consumer staples, selectively built up over an extended period.

Momentum strategies are currently out of favor. My contrarian investment philosophy is exceptionally well-positioned to capitalize on these market conditions.
As highlighted during recent weeks already, I have recently initiated short positions in overhyped stocks, continued taking profits on equities with strong recent performance, and selectively bought stocks that have been heavily beaten down or neglected.
Today, I continued to reduce exposure by taking profits in select European equities and financials as well as some Chinese stocks which have delivered strong gains since the beginning of the year.

The battle over tariffs between countries is not the only one unfolding. Financial markets have become another battleground. Investors driven by FOMO (fear of missing out) clash with those gripped by fear, leading to significant market swings in recent days.
This volatility persists even as an indicator of investor sentiment has been signaling "extreme fear" for several days.

Meanwhile, the ECB lowered its benchmark rate by 25 basis points today to support and stimulate weak economy.

Markets: China stock market continued to rally, European markets with a rebound in the later trading session ending the day mostly in the green. In the US, tech sell-off continues, USD weak and Euro declines against Swiss franc after the latest fast increase.

My view: At the moment, economic data has taken a backseat, yet it remains more important than ever to monitor. Investors are chasing the markets, with speculative money rushing to "buy the dip" at any sign of opportunity, largely driven by hope and past experiences. This strategy has worked well in recent years. However, as mentioned before, this time is different. Many speculators, lacking market experience, have never faced significant losses and continue to rely on the belief that buying the dip will always pay off.

This speculation is fueling irrational market movements, creating both risks and opportunities. Recently, the euro has strengthened on hopes of a recovery, spurred by potential stimulus measures. However, I remain skeptical that Europe will stage a meaningful turnaround, especially given the heightened uncertainties compared to just a few weeks ago.

As a result, I made a significant adjustment to my investment strategy today, hedging the euro against the Swiss franc at 0.9592, before the European Central Bank announced its rate cut.

Market patterns are shifting almost on an hourly basis:
The battle on tariffs and trade war kicked-in. Tariffs are being implemented, put on hold, selectively applied to certain sectors, or merely announced as potential measures.
Adding to the uncertainty, geopolitical instability remains a major global concern, with the unpredictable situation in Ukraine.
Meanwhile, Germany is pushing for fiscal reforms to enable increased defense and infrastructure spending.

Markets: strong rebound on a global basis catching up some of the recent losses, interest rates in Europe and US are rising while the Euro saw a strong increase.

My view: To benefit from this short-term and fast moving market swings based on the news flow is almost impossible. As the German saying goes “hin und her macht Taschen leer”, frequent trading and fast changing the tactical investment view can quickly deplete your funds. The risk of losses is high since market reactions are often swift, reversing direction before a trade can be executed with a positive payoff.

I also do not expect Trump to easily strike deals or lift tariffs in the coming days or weeks. His strategy seems more focused on demonstrating power and using tariffs as a threat to future trade partners. Europe is likely to be the next target.

What does such an environment mean for corporations? Strategic planning becomes extremely difficult, if not impossible. In times of uncertainty, management tends to put investments and projects on hold rather than commit capital. If this chaotic situation persists, the risk of a recession will undoubtedly increase.

The key takeaway: do not chase the news. Maintain a steady investment stance and act selectively. As I have mentioned several times before already, I expect volatility to remain elevated. Therefore, my portfolio is structured accordingly to manage downside risks, especially as valuations appear stretched, and investors put a lot of optimisms in the tariff topic.
While German reforms could provide a boost to the economy, much of the optimism already seems priced in following the recent surge in stock prices.

At lot of news and latest economic data released reaching us, all have a certain potential of a bigger market impact:
- on Friday evening, the clash between US president Donald Trump and Ukrainian president Volodymyr Zelenskyy.
- on Sunday, in a Truth Social post, US president Donald Trump announced the creation of cryptocurrency reserves and the selected crypto candidates.
- today, higher inflation data out of Europe with leading indicators showing continued weakness.
- announced tariffs should be in place by tomorrow.
Exception is China, where leading indicators start to show a potential acceleration of the economy, with the PMI (Purchasing Manager Index) marking over the 50 threshold, indication growth.

Markets: China’s stock indices trading sideways; in Europe, euphoria seems to continue, stock prices see a big jump today; US Futures continue to rise so far after the late rally on Friday. Interest rates continue to decline with the US 10-year Treasury below 4.2%. Cryptos give up part of the big gains. Euro rises while US dollar weakens; gold rises after the latest profit taking.

My view: Almost no day with news that could negatively impact financial markets. Yet, investors continue to largely ignore them. Geopolitical tensions and uncertainty are steadily rising to levels unseen for years, while economic data increasingly signals some weakness. Consumer data from both Europe and the US, a crucial pillar of the economy, has recently softened, while inflation remains persistently high. The potential introduction of tariffs could even reignite inflationary pressures, raising concerns about a slower-than-expected rate cut cycle.

Regarding cryptos, I would not be surprised if there was some insider trading took place ahead of the weekend announcement. After the recent sell-off and Sunday’s sharp rebound, the question is now on whether the market can establish a sustainable stabilization.

Despite these growing number of risks, which even are becoming more probable, investors seem unfazed.
Given this backdrop, the overall investment view remains unchanged. I refrain from taking an all-in stance, remain a bit cautious. This also means I am keeping most of my short positions in place, lowering my net long equity exposure.
I selectively add positions and some bets, focusing on beaten-down stocks, with strong potential for recovery while shorting overhyped stocks that have surged due to speculation.
Improving economic data from China convince me to keep a focus and therefore a major allocation in Chinese equities as I see more upside from here even after the latest increase. However, should the trade war escalate, China’s markets could hardly withdraw from a correction.

Nvidia's earnings release turned out to be a non-event last night, with the stock barely reacting. However, today painted a different picture. After an initial 2% rise, the stock took a sharp downturn, closing around 8% lower.
News about tariffs from the White House weighed on market sentiment, triggering significant losses.
The tariffs announced over a month ago and temporarily suspended will take effect on March 4. US President Donald Trump set 25% tariff on imports from Mexico and Canada, along with a 10% tariff on goods from China, an additional 10% levy.
At the same time, Trump announced a 25% tariff on autos and other imported goods from Europe. Further details are expected to be revealed at the beginning of April. European leaders reacted promptly and strongly, saying they will react firmly and immediately.

Markets: European indices down around 1%, Nasdaq down almost 3%, cryptos continue the downturn, oil and US dollar gain while gold takes a hit, interest rates moving sideways.

My View: It is interesting how quickly investors seem to forget. The tariffs were only temporarily suspended, and it was clear this issue would resurface by the end of the month, especially given Donald Trump's well-known stance on tariffs.
However, there is still time to negotiate a solution to avoid these tariffs. That said, I believe the tariffs could very well take effect this time. President Trump wants to assert his authority and prove that tariffs are not just a bluff but a real policy tool that can be implemented at any moment.

As I have previously mentioned, short-term market patterns driven by investors and speculators have largely ignored these negative factors in recent weeks. So, it is no surprise to me that stock market took a hit today. Expecting such a hit, my portfolio was well-positioned for this turmoil, closing the day even with a small gain.

After the four days loosing streak markets seemed to rebound today. What worked for European equities, only worked in the first half of today’s trading session for US markets.

Markets: European indices up more than 1%, US stocks with intraday reversal after a 1% gain. Cryptos with big losses.

My View: Already yesterday, on quite a number of channels I could read or hear about the advice to buy the dip. Why not, as this worked out very well so far each time in the past with a similar market and sentiment situation, at least on first sight.
I already mentioned yesterday, that this time could be different. The reason, why I did not take the risk to add new exposure. Uncertainties remain and the topic of tariffs comes back on the agenda, at latest by end of the month.

Let's first see what Nvidia earnings release will bring tonight. I expect the news will have quite a market impact on a short-term basis.

From cryptocurrencies to tech stocks, the market sell-off is intensifying, driven by sharp declines in AI-related stocks - some of which have dropped over 30% in recent days after hitting record highs.
Weak consumer data released this afternoon in the U.S. reinforces concerns about a slowing economy and adds pressure.

Markets: AI stocks under pressure; broader tech weakness weighs on the Nasdaq, down 1.5%; Flight to safety: with US 10-year yields dropping below 4.3% and safe haven currencies Swiss franc and yen strengthening.

My View: Last week was not my first warning about excessive speculation in AI and other high-risk assets, including high-yielding corporate bonds. Almost a year after the first wave, it seems that the burst of the AI bubble gets real in form a second wave.
Market sentiment reached an “extreme fear” level. However, markets are just about to start a correction coming off their record highs. Normally this sentiment level is reached after a several days of a correction. This time, things are different. If the cycle of forced unwinding gains momentum and reaches the broader market, fear could persist for longer.

With the Swiss franc strengthening, I closed my tactical long position in the British pound, opened mid January, realizing a profit of 1.5%, a nice amount in absolute terms.

Today marks also a premier in my investment career. Never ever before I switched directly from a long, directly into a short position. The speculative up-move of Thyssenkrupp’s stock price triggered this shift. Taking profit of the remaining position in two steps (EUR 7.116/ 7.072), then open the short position at EUR 7.222. Extreme market moves come along with opportunities.

A key event is going to take place on Wednesday this week. After market close, Nvidia will release its latest quarterly earnings. The outcome could either stabilize the market or, if the numbers disappoint, intensify the pressure on semiconductor and tech stocks.

In my last post on Market Insights yesterday, I expressed my surprise at the lack of a correction in cryptocurrencies following the recent theft incident. Yet, barely an hour after highlighting the potential for a deeper pullback, the sell-off began.

Markets: All cryptos deeply in red today, extending losses. Except XRP (Ripples) all major cryptos with negative performance year to date (YTD).

My View: As mentioned yesterday, the slum in crypto currencies does not come as surprise to me, triggered by investor behavior. All speculative positions, including crowded stocks, are loosing heavily ground. Therefore leveraged speculators are forced to close their bets to create enough margin.
I am closely monitoring the sell-off and focusing on its potential spillover effect on the stock market.

The news is not new anymore. Last Friday, hackers stole USD 1.5 billion worth from crypto exchange Bybit.

Markets: Cryptos showed some correction after the news, recovered during the weekend and now show more downside with Bitcoin below USD 95’000.

My View: The psychological effect of such an incident should not be underestimated. This theft highlights the risks of market disruption and could have lasting implications for the digital asset industry.
I was surprised that the event had only a minor impact on cryptocurrency prices, especially considering the rapid recovery over the weekend. However, I believe that in the near to mid-term, this incident could have a significant impact on the overall crypto market. Institutional investors, with their bigger assets power and known for their conservative risk profiles, might hold back from allocating new capital to digital assets for a longer time period after such an event. Should this turn real, this would definitely lead to reduced inflows in digital assets. Then, the market would only be driven by the remaining private investors and speculators.

A personal flashback to the years 2006-2008 with a similar situation when institutional investors caught on the wrong foot. Do you remember the time of oil prices above USD 140? With the oil price and overall rally in commodities that period, banks actively encouraged institutional investors to add commodities in their asset allocation. Frankly speaking, major driver for this change advised to clients, the increase of margins and therefore higher returns for the bank by adding a new product category with higher fees. With the conservative stance and set-up, institutional clients took time to consider. With prices advancing further, they slowly started to adapt their asset allocation adding commodities or oil to the portfolio. This happened just short period before the oil price started to collapse. After that event and with such a negative experience, any institutional investors ever was open to add commodities to their asset allocation. The ones invested at that time, took the loss and deleted the asset class thereafter out of their benchmark. A negative experience with a big psychological effect.

I already highlighted a potential risk of a spill-over effect from collapsing cryptos over to the stock market in my blog article “Cryptos in correction mode - risk of spill-over effect?” on 5 July 2024.
The reason of a spill-over effect could be that the most speculative investment space at the moment are cryptos and tech stocks. Both, digital assets and traditional assets are showing some larger losses. This could force speculators to reduce their positions as a higher number of this group of investors is highly leveraged. Looking at prices of stocks with lot of speculators invested, soon we could reach levels which could cause a margin call should prices continue to fall. Margin calls usually trigger heavy sell-offs in markets which then can be used to buy the assets on a cheaper level while leveraged speculators are forced to sell.

Disclosure of ETFMandate portfolio: No allocation in cryptos ever

On the weekend, German election took place. The results do not show big surprises. The question was rather on numbers and percentage changes.

Markets: German stock index and euro show positive reaction with Dax index up 1%.

My View: I have some doubts that the most probable outcome, the big coalition, will be able to make the big changes and economic reforms needed. Without a political statement, the second partner in the coalition, SPD, was in the driving seat during the last government period, which completely failed. Should this coalition become reality, more than a fifth of German voters are ignored, the second largest party with by far the most gains during this election.
Therefore I doubt that the German and also European economy is set for a quick economic recovery, to gain back which the market is pricing in at the moment. Not the best conditions for stability in this country.
My view remains that after this positive momentum since the beginning of the year, markets are vulnerable for setbacks.

On the weekend, German election will take place. Based on the latest performance on the stock market, investors expect a positive outcome for future economic reforms needed.
Economic leading indicators in Europe are rather on the weak side without sign of a fast recovery.
In addition, the political tension is played with the US playing a dominant role and almost no day without announcement which are rising questions about the way and role of each region in the future.

Markets: stock markets hold up quite well. China outperforming. Cryptos, first day of stronger upmove, interest rates lower, US dollar up while euro weakens.

My View: In my view, the overall risk stance is too euphoric. The downside risks should not be ignored at the moment. Election, political uncertainty and instability in France and Germany, with the new role of US dominance and Europe in the back seat. There is also room for negative economic surprises, higher inflation and less interest rate cuts as estimated.
It seems China did its homework and is now the time to benefit.

Even there is a chance of a melt-up in such a euphoric environment, I do not run the portfolio with too high risk allocation and I am positioned for certain pull-backs. Should the momentum turn, it could quickly go in the other direction.

I continue to analyze market patterns, observing that over the past two years, market movements have become faster and at the same time more intense compared to historical trends. This shift may be driven by the growing influence of AI-driven trading tools and financial influencers.

China tech stocks surge significantly, driven by strong earnings results from Alibaba released today. The sector had already been experiencing an upward trend in recent trading sessions and weeks, reflecting growing investor confidence on China’s economy with signs of recovery.

Markets: at time of publishing, US Tech Nasdaq is down more than 1%, China Tech stocks jump with Alibaba (+10%) - US interest rates down, US dollar down, gold unchanged while cryptos lost part of their intraday gains.

My View: Moving markets are challenging, however offer also opportunities.
The timing proved to be quite farovable. The opened and increased short positions, mainly on US Tech stocks, implemented during the last trading sessions are yielding solid returns. At the same time my larger allocation in Chinese stocks, particularly in the tech sector, is also paying off. Today, I have already taken partial profit on equities in both Europe and China’s tech sector, executing this through raised levels in stop orders.

Pure euphoria drives indicators to new all-time highs and in the meanwhile to some flashing red lights. Some of the indicators are:
- technically overbought levels in Europe.
- According to latest report from Bank of America, cash levels of global fund managers are at 15-year lows, down to 3.5% which usually indicates a good sell signal.
- Leveraged ETFs have USD 104 billion assets under management, the highest level ever.
- Insider transactions show higher number of selling deals, means the manager are reducing their stock exposure.
- Bloomberg stock sentiment index shows ‘manic level’
- US private households, 3 out of 5 expect higher stock prices within the next 12 months, while only 20% expect higher income in the next 12 months, highest level since the survey was initiated back in 1987
- volatility on equity and bond side are on low levels despite high number of uncertainties
- Credit spreads reached a very low level: in the US, the premium for corporate bonds payed over US Treasuries are around the lowest level since 1998.
- Exceptional single stock moves: e.g. Meta stock had 20-day winning streak

Markets: seem to be losing some steam with momentum fading.

My View: Market patterns definitely demonstrate pure euphoria with bad news and uncertainties largely ignored.
From an economic standpoint, inflation remains elevated, suggesting that interest rate cuts will come at a slower pace than previously anticipated. Consumer spending is weakening, as seen in January’s retail sales figures, and leading indicators show no signs of a rapid recovery.
On the geopolitical front, a swift resolution to the war in Ukraine seems unlikely, and peace talks may take longer than the market currently expects. Additionally, the threat of further tariffs looms, which could weigh on economies. As long as these uncertainties persist, corporations are likely to hold off on major investments.

How long market euphoria will last is always difficult to predict. It largely depends on the liquidity available and how much capital can still be funneled into the market. As long as excess money continues to flow in, the rally may persist—but once liquidity dries up, sentiment can shift quickly.
While I do not foresee a major market crash, as there are no signs of a deep recession yet, a pullback could happen at any time.

To manage my portfolio and lock in some of the recent gains, I have set stop levels on some positions to secure profits if the market turns negative and increased my short positions, which reduces my overall net equity and risk exposure.

Hardly a day passes without news of yet another all-time high in stock indices across Europe and the US. In Europe, Germany’s benchmark DAX Index, Euro Stoxx 50 as well as the pan-European Stoxx 600, have notched record after record this year.
The rally is driven by optimism that Germany’s election will yield a market friendly outcome, enabling the new government to implement much-needed economic reforms. Additionally by hopes that the war between Russia and Ukraine could soon come to an end following talks on the agenda, initiated by US president Donald Trump.

Markets: Stock markets are rising across the globe with US and European indices hitting new all-time highs.

My View: This sharp rise in stock prices comes rather as a surprise. Typically, with so many economic and political uncertainties, markets do not exhibit such euphoria.

In the US, egg prices reached an all-time high, up 15.2% month over month in January, the highest jump in nearly a decade. The prices almost doubled in one year, particularly affected by a spike in bird flu infections, which has led to egg shortages. Prices continue to soar, in case shoppers can even find them in grocery stores. Retailers started to limit egg purchases per customer.

Markets: -

My View: According to the data, food prices are not the primary driver of the current persistently high inflation anymore. However, eggs are a widely consumed product, and their rising prices are noticeable to consumers. In addition, media coverage has amplified public awareness, reinforcing the perception of high inflation. As a result, this psychological effect can negatively influence overall consumer sentiment, potentially impacting spending behavior and economic confidence.

In the US, the Consumer Price Index (CPI) increased by 0.5% in January, leading to an annual raise of 3.0%, up from 2.9% in December. Core inflation also rose by 3.3% on an annual basis while a data point of 3.1% was expected.
This marks the fourth consecutive month of rising inflation. Investors have now reduced the number of rate cuts from to 2 to 1 this year and pushed their expectations from September to December while US President Trump is calling for lowering the interest rates.

Markets: Overall stock markets took a hit right after the data release and are now on the way to recover some of the losses. Same for cryptos while interest rates jumped with the 10-year US Treasury yield above 4.6%. On the back of higher interest rates the US dollar saw some gains, giving some of it back already.

My View: This inflation snapshot is the last before Trump’s tariffs hit. Therefore inflation could remain elevated or even reaccelerate which could prompt an even more cautious stance by the Fed going forward. Looser monetary policy will not be the supporting factor for stock markets in the US for the timing being.
With a continuing higher level of uncertainty, volatility and fast moving asset fluctuations as seen the recent weeks, will not disappear that quickly.
Fluctuations mostly offer selective opportunities. I am happy to share these investment opportunities identified soon with all the subscribers of the Premium Newsletter. The feature is going to be activated soon.

The key focus and potential key market driver over the next two days will be US monetary policy, particularly interest rates. Federal Reserve Chairman Jerome Powell is set to testify before Congress tonight and tomorrow, addressing economic conditions amid near-full employment and expectations of easing inflation. His comments will be closely watched for insights on uncertainties surrounding tariffs, immigration, and the broader impact of trade and other policies under the Trump administration, which continue to evolve.
We will get new insights into inflation tomorrow afternoon, with the release of January’s data. Analysts anticipate that price levels will remain stable or ease slightly.

Markets: US interest rates have begun to rise slightly since yesterday. The 10-year Treasury yield has climbed back above 4.5% after briefly approaching 4.4% just a few days ago. In comparison, yields stood at 4.8% back in January.

My View: Jerome Powell is likely to reaffirm the Fed’s rather cautious and go-slow approach, which could keep yields from making significant moves. However, with markets still pricing in some rate cuts this year, there may be further room for yields to decline, unless the inflation data tomorrow shows a different pattern.

Meanwhile, market sentiment remains on edge as indices approach technically overbought levels combined with a very bullish stance, adding to the potential for volatility.

On Sunday evening US president Donald Trump announced additional 25% tariffs on all steel and aluminium imports into the US.

Markets: Strong gains in China, solid gains in Europe and US futures in plus after selloff on Friday. Only some bigger price moves in the metal sector. Gold with new all-time high above USD 2’900.

My View: While markets reacted heavily on the first tariffs announcement back in January, now they seem to ignore latest news regarding tariffs and the potential risk of a trade war. The question remains the same, what is next?

Almost no day without shifts in short-term sentiment between fear and greed. In such situations, it is crucial to maintain a steady stance and only make significant strategic adjustments if the market and overall risk sentiment undergo a fundamental shift. During such market swings, short-term opportunities may also arise. For this, markets have to be closely monitored.

The coming days, in the event of an announcement or development perceived as unfavorable by investors, overbought markets could face a correction as sentiment shifts and speculative positions would get unwinded.

The topic inflation has once again become a key market driver, fueled by the latest policy plan on tariffs, which has caught the attention of US consumers.
On Friday, the latest consumer sentiment survey revealed that one-year inflation expectations surged to 4.3%, up from 3.3% last month.⁠ This marks the highest inflation expectation reading since November 2023 and the second consecutive month of "unusually large" increases.
Notably, this is just the fifth time in 14 years that the survey has recorded such a significant one-month rise - defined as increase of at least one percentage point in year-ahead inflation expectations.⁠

Markets: Immediate reaction with profit taking and some sharp drops in stock prices and risky assets after the data release. Interest rates saw an increase together with the USD. Gold, again the winner.

My View: Markets are reacting nervously to any data that deviates from expectations, likely due to the high volume of speculative bets influencing market sentiment in the short-term. The markets might remain vulnerable the coming days and weeks, so far always with a fast comeback.