23.04.25 - Relief rally
Tensions between Donald Trump and the US central bank ease. Donald Trump said that he has no plans to fire Federal Reserve Chairman Jerome Powell. Before US President Donald Trump called Powell “Mr. Too Late” and “a major loser” for not cutting interest rates.
Markets: Major Equity indices in green across the globe. Bitcoin saw a rally from USD 83’ to almost 95’000 within two days, gold is taking hit with profit taking, US 10-year yield back below 4.35%, while US dollar stabilizes after recent drop.
My view: At this point, buying equities feels more like a bet on hope and speculation than a decision grounded in fundamentals. With the latest correction, some stock prices may appear cheap now, but given the elevated valuations we have recently seen at market tops, there is still ample room for downside, especially in case a recession materializes, tariff issues remain unsolved, or new disruptive factors emerge.
The latest leading indicators published this morning for Europe suggest a less optimistic economic outlook. Until now, the service sector has been relatively resilient, but the most recent April PMI (Purchasing Managers' Index) points to a contraction. ahead. Later today, we will see the US figures.
At the same time, I keep a focus on the earnings season which is gaining momentum as more companies report. However, the Q1 earnings are becoming less relevant. What matters more now is the forward guidance. Uncertainties started by end of the first quarter. The significant tariff disruptions only began in early Q2.
The market patterns reminds me on the years of 2001 after the burst of the IT bubble. Markets tried to rebound each time after a selloff. However, the rebound did not materialize as it was not sustainable.
Given the mounting uncertainties and the lack of a finalized tariff agreements, I have strong doubts about the sustainability of this rally. It appears more like a short-term bounce rather than the beginning of a durable upward trend.
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