Elite Research | 26.01.2025

Australian Dollar (AUD) Fundamental Outlook – Short to Medium Term

1. Monetary Policy & RBA Outlook

• The Reserve Bank of Australia (RBA) is expected to cut rates in the coming months, with market pricing indicating a strong probability of a 25bp cut.
• Core inflation has slowed and is within the RBA’s target range, reinforcing the case for easing.
• The labor market remains resilient, but softer wage growth suggests less inflationary pressure, giving the RBA room to adjust policy.
• Divergence between the RBA and the Federal Reserve (which is expected to maintain a more hawkish stance for now) may weaken AUD as rate differentials move against it.

2. Macroeconomic Data & Trade

• GDP growth is moderating as higher interest rates weigh on consumption and business investment.
• Australia’s trade surplus remains strong, but softening global demand—especially from China—is a risk factor.
• Consumer confidence is weakening, reflecting concerns over mortgage costs and slower income growth.
• Retail sales data show sluggish demand, further supporting the argument for RBA easing.

3. Market Sentiment & Positioning

• Investors are generally bearish on AUD due to expectations of an RBA rate cut.
• AUD remains sensitive to global risk sentiment—any deterioration in equity markets or risk-off events could drive further downside.
• Short positioning in AUD has increased, but potential short squeezes could lead to temporary rebounds.

4. Commodities & China Impact

• Australia’s reliance on commodity exports (iron ore, coal, LNG) means AUD is closely tied to China’s economic health.
• China’s recent economic data has been mixed, with some improvement in PMI figures but ongoing weakness in real estate and domestic consumption.
• Any additional stimulus from China would be supportive for AUD, particularly if it targets infrastructure or manufacturing demand.
• Iron ore prices have stabilized but remain vulnerable to shifts in China’s policy direction.

5. Geopolitical & Political Risks

• Uncertainty around U.S.-China trade relations could impact Australian exports.
• Possible tariffs or restrictions from key trading partners would weigh on AUD.
• Domestic political factors are stable but could influence fiscal policy, particularly regarding infrastructure spending and subsidies.

6. Other Relevant Factors

• AUD remains a high-beta currency, meaning volatility will be driven by global risk appetite.
• U.S. dollar strength, particularly if the Fed remains hawkish for longer, would keep AUD under pressure.
• Any unexpected shocks in global financial markets, particularly from U.S. monetary policy or geopolitical tensions, could exacerbate AUD downside risks.

Bottom Line

• Bearish bias in the short to medium term due to expectations of RBA rate cuts and weak domestic data.
• Downside risks from China’s economic struggles and global risk sentiment.
• Potential upside catalysts include stronger-than-expected domestic data, a dovish Fed pivot, or significant Chinese stimulus measures.

Canadian Dollar (CAD) Fundamental Outlook – Short to Medium Term

1. Monetary Policy & Bank of Canada (BoC) Outlook

• The Bank of Canada (BoC) is expected to maintain rates in the near term, but markets are pricing in potential rate cuts by mid-2025 as inflation slows.
• Core inflation remains above target, but recent data has shown signs of softening, reducing the urgency for further tightening.
• The BoC’s stance remains data-dependent, with a focus on employment trends and consumer spending before making further decisions.
• A dovish shift by the Federal Reserve could also influence BoC policy, but for now, the central bank is maintaining a more neutral stance.

2. Macroeconomic Data & Trade

• GDP growth is slowing, reflecting the impact of higher interest rates on household consumption and business investment.
• Retail sales have shown resilience, but consumer spending remains under pressure due to elevated borrowing costs.
• Canada’s housing market remains a concern, with rising mortgage renewals putting strain on household finances.
• The trade balance remains positive, but risks from global economic conditions, particularly in the U.S. and China, could weigh on exports.

3. Market Sentiment & Positioning

• CAD has seen increased volatility due to uncertainty surrounding U.S. trade policies, particularly potential tariffs on Canadian goods.
• Investor sentiment is mixed, with some positioning for further CAD weakness due to economic headwinds.
• Short positioning has increased, reflecting concerns over both domestic economic conditions and external risks.

4. Commodities & Energy Market Influence

• Oil remains a key driver of CAD, and fluctuations in crude prices continue to impact the currency.
• Trump’s recent comments on lowering oil prices have added downside risk to CAD, as increased supply could weigh on Canada’s energy exports.
• Canadian crude differentials remain relatively stable, but any major shifts in U.S. demand or global oil supply could affect CAD performance.
• Natural gas exports remain an important factor, with seasonal demand fluctuations impacting trade balances.

5. Geopolitical & Political Risks

• The threat of U.S. tariffs on Canadian goods remains a key risk, with potential 25% tariffs still under discussion.
• A weaker global economic outlook could reduce demand for Canadian exports, particularly if the U.S. economy slows down.
• China’s economic slowdown is another risk, as reduced demand for commodities would weigh on Canadian exports.

6. Other Relevant Factors

• BoC-Fed policy divergence will continue to be a major factor for USD/CAD movements.
• Any significant changes in global risk appetite could impact CAD, as it is sensitive to overall market sentiment.
• A stronger-than-expected Canadian economic recovery or unexpected hawkishness from the BoC could provide upside support.

Bottom Line

• Neutral to slightly bearish outlook due to global uncertainty and potential U.S. trade risks.
• Downside risks include potential tariffs, a slowing Canadian economy, and weaker oil prices.
• Potential upside catalysts include stronger domestic data, resilient energy markets, or a more dovish Fed.

Swiss Franc (CHF) Fundamental Outlook – Short to Medium Term

1. Monetary Policy & Swiss National Bank (SNB) Outlook

• The Swiss National Bank (SNB) is likely to keep rates steady in the short term but could pivot towards easing later in the year.
• Inflation has cooled significantly, reducing the need for further rate hikes.
• The SNB remains active in the FX market, intervening to prevent excessive CHF appreciation, which could weigh on exports.
• A weaker global rate environment may lead the SNB to reassess policy, especially if the European Central Bank (ECB) and Federal Reserve (Fed) start cutting rates.

2. Macroeconomic Data & Trade

• Swiss GDP growth is sluggish, reflecting weak global demand and domestic consumption.
• Export performance remains strong, but the strong CHF poses a challenge for Swiss manufacturers.
• Unemployment remains low, but consumer sentiment is weakening amid concerns over slower growth.
• Core inflation continues to decline, supporting expectations of a more neutral SNB stance.

3. Market Sentiment & Positioning

• CHF remains a key safe-haven currency, and demand could increase if global geopolitical risks rise.
• EUR/CHF has risen above 0.9450, indicating a slight cooling in CHF demand as global risk appetite improves.
• The Swiss real effective exchange rate has moderated, reducing concerns about excessive currency strength.
• CHF is increasingly being used as a funding currency, especially as global central banks shift towards rate cuts.

4. Geopolitical & Political Risks

• Ongoing uncertainty in the Eurozone (especially regarding France and Germany) has fueled CHF demand, though this has cooled recently.
• U.S. trade policies remain a wildcard, with potential implications for global market sentiment and CHF positioning.
• The potential resolution of the Ukraine war could reduce geopolitical risk, leading to a diminished CHF safe-haven appeal.

5. Other Relevant Factors

• SNB interventions could limit CHF upside, as the central bank continues to monitor currency strength.
• A less aggressive U.S. trade stance under Trump has slightly reduced safe-haven flows into CHF.
• If global equities remain supported, CHF could weaken as investors shift towards riskier assets.
• Swiss disinflation trends are helping to rebalance CHF valuations, reducing the pressure from excessive strength.

Bottom Line

• Neutral outlook, with CHF remaining a safe haven but with less urgency as global risk appetite improves.
• Downside risks include SNB intervention, lower inflation, and a more dovish shift in global central banks.
• Potential upside catalysts include renewed geopolitical uncertainty, weaker Eurozone data, or a deterioration in global risk sentiment.

Euro (EUR) Fundamental Outlook – Short to Medium Term

1. Monetary Policy & European Central Bank (ECB) Outlook

• The ECB is expected to continue its rate-cutting cycle, with a 25bp cut anticipated in January, followed by another in March.
• The terminal rate is projected around 2.25% by mid-year, as inflation stabilizes but remains above target.
• Neutral policy rate estimates vary, but most ECB members see it between 1.75% and 2.5%, suggesting room for more easing.
• The ECB’s quantitative tightening (QT) is accelerating, reducing excess liquidity, which could steepen the yield curve and impact funding conditions.
• Policymakers remain concerned about wage growth, which could slow inflation’s decline and delay aggressive rate cuts.

2. Macroeconomic Data & Trade

• GDP growth remains weak, with the Eurozone economy close to stagnation, though December PMIs showed some stabilization.
• The services sector is outperforming manufacturing, which continues to contract due to weak global demand.
• Exports remain under pressure, with U.S. trade policy uncertainty posing additional downside risks.
• Labor markets are resilient, but job growth is slowing, and some concerns remain about wage pressures feeding into inflation.

3. Market Sentiment & Positioning

• Investor sentiment on EUR is mixed, with markets expecting ECB rate cuts but also noting the potential impact on capital flows.
• Short positioning in EUR has increased, as traders anticipate lower interest rate differentials against the USD.
• EUR remains sensitive to risk sentiment, meaning geopolitical or financial market shocks could drive volatility.

4. Geopolitical & Political Risks

• U.S. trade policy is a key risk, as potential tariffs on European goods could weigh on industrial production.
• Eurozone productivity growth remains weak, raising concerns about long-term competitiveness compared to the U.S.
• Political uncertainty in key economies like France and Germany could further weigh on sentiment.

5. Other Relevant Factors

• ECB rate cuts will likely weigh on EUR/USD, particularly if the Fed remains cautious in cutting rates.
• Eurozone inflation is cooling but remains sticky in services, meaning the ECB will likely cut rates gradually rather than aggressively.
• Global growth trends, particularly in China and the U.S., will be key drivers for EUR, as they impact external demand.

Bottom Line

• Bearish bias in the short term, as ECB rate cuts and weaker growth weigh on EUR.
• Downside risks from trade tensions, political uncertainty, and continued industrial sector weakness.
• Potential upside catalysts include stronger domestic data, a more dovish Fed, or improved risk appetite globally.

Crude Oil Market Outlook – Short to Medium Term

1. Supply & OPEC+ Strategy

• President Trump has called for lower oil prices, pressuring OPEC+ to increase output, but compliance remains firm.
• OPEC+ continues to manage supply, with Saudi Arabia maintaining voluntary cuts to keep Brent above $80/bbl.
• Russian oil production has declined, but exports remain stable due to discounted sales to Asia.
• U.S. crude inventories have declined for nine consecutive weeks, indicating strong demand despite refinery maintenance.
• Iran and Libya have seen minor declines in production, further tightening supply.

2. Demand & Global Consumption Trends

• China’s demand remains sluggish, with industrial activity weaker than expected.
• European oil demand has slightly improved, but remains below pre-pandemic levels.
• Cold weather in the U.S. is boosting short-term heating oil demand.
• India and emerging markets continue to drive consumption growth, but at a slower pace.

3. Market Sentiment & Positioning

• Net long positioning in crude has increased, suggesting investors are cautiously bullish.
• Brent implied volatility remains low, but market risks could lead to price swings.
• Hedge funds remain structurally long crude, betting on tighter supply into summer.

4. Geopolitical & Trade Risks

• Middle East tensions remain a risk, particularly with ongoing Red Sea disruptions.
• U.S. is considering tariffs on Canadian crude, though the probability of a 25% tariff has moderated.
• Russia-Ukraine conflict continues to impact logistics and crude flows, with Russia shifting more oil to China and India.

5. Other Relevant Factors

• U.S. shale output remains constrained, with slower growth in rig counts.
• Brent-WTI spread remains stable, reflecting balanced transatlantic flows.
• Global refinery margins are declining, particularly in Asia, affecting crude demand.

Bottom Line

• Neutral to slightly bullish bias, with supply management and geopolitical risks keeping prices supported.
• Downside risks include weaker China demand, OPEC+ supply adjustments, and potential U.S. policy shifts.
• Potential upside catalysts include stronger seasonal demand, supply disruptions, and sustained inventory draws.

Natural Gas Market Outlook – Short to Medium Term

1. Supply & Production Trends

• U.S. natural gas inventories declined by 223 Bcf last week, but the draw was smaller than expected, leading to a slight decrease in Henry Hub prices.
• European gas storage levels are lower than last year, with inventories at 58% full, compared to 74% at the same time last year.
• Russia continues to reroute gas flows, shifting more LNG to Asia as European demand remains constrained.
• Global LNG supply remains tight, though new export capacity coming online in the U.S. and Qatar in 2025 may ease supply-side pressure.

2. Demand & Consumption Trends

• European gas demand remains steady, but concerns about future storage injections persist due to backwardation in the forward curve.
• Warmer weather in the U.S. has slightly reduced short-term gas demand, leading to a temporary softening in prices.
• China's gas imports remain sluggish, with weaker industrial demand weighing on consumption growth.
• India and emerging markets are still expanding LNG imports, though at a slower pace due to cost sensitivity.

3. Market Sentiment & Positioning

• TTF European gas futures are trading near €50/MWh, reflecting a more balanced supply-demand outlook.
• Backwardation in the European forward curve discourages storage injections, raising concerns about next winter’s supply.
• Speculative positioning in natural gas remains mixed, with traders assessing risks from both weather and geopolitical disruptions.

4. Geopolitical & Trade Risks

• Middle East tensions remain a key risk, with potential disruptions to LNG shipping routes.
• U.S. policy on energy exports remains uncertain, with potential regulatory shifts under a new administration.
• Russian gas exports continue to face restrictions, though flows to China and Turkey remain steady.

5. Other Relevant Factors

• Carbon pricing and energy transition policies in Europe continue to influence gas demand.
• Infrastructure bottlenecks in the U.S. are limiting LNG export growth, affecting price arbitrage opportunities.
• Long-term contracts for LNG supply are increasing, reducing spot market volatility but limiting supply flexibility.

Bottom Line

• Neutral to slightly bullish bias, with supply constraints and geopolitical risks keeping prices supported.
• Downside risks include warmer weather, increased LNG supply, and lower industrial demand.
• Potential upside catalysts include colder-than-expected winter temperatures, disruptions in global supply chains, or renewed geopolitical tensions.

Gold (XAU) Fundamental Outlook – Short to Medium Term

1. Monetary Policy & Interest Rate Outlook

• Gold remains highly sensitive to Fed rate expectations, with investors closely watching for signs of easing.
• The Federal Reserve is expected to hold rates steady in the near term, with rate cuts projected later in 2025.
• Real interest rates remain elevated, limiting significant upside for gold in the absence of clear Fed dovishness.
• A weaker USD could provide some support for gold prices, especially if inflation expectations increase.

2. Inflation & Safe-Haven Demand

• Inflation is moderating but remains above target in key economies, sustaining some demand for gold as an inflation hedge.
• Geopolitical risks (U.S.-China tensions, Middle East conflicts, and Russia-Ukraine war) continue to drive safe-haven flows into gold.
• Volatility in equity markets could also increase gold’s appeal, particularly if investor risk appetite weakens.

3. Central Bank Purchases & Market Flows

• Central banks remain net buyers of gold, with China, India, and Russia increasing their reserves.
• Asian central banks are diversifying away from the USD, supporting physical gold demand.
• Gold ETF holdings remain stable, with some outflows driven by higher real yields but offset by central bank accumulation.

4. Demand & Supply Dynamics

• Physical demand from India and China remains strong, though higher prices have slightly reduced jewelry purchases.
• Gold mining supply remains constrained, with no major new projects expected to impact global output significantly.
• Recycling supply has increased, as higher prices encourage secondary market sales.

5. Market Sentiment & Positioning

• Hedge funds and speculative traders have maintained long positions, but with reduced conviction due to Fed uncertainty.
• Implied volatility in gold remains low, suggesting a stable near-term price outlook unless macro conditions shift.

6. Other Relevant Factors

• A strong USD limits gold’s upside potential, though any weakness in the dollar could act as a bullish catalyst.
• Gold remains a key hedge against currency devaluation, particularly in emerging markets facing inflation pressures.
• The Fed’s balance sheet reduction (QT) continues, which could weigh on gold by tightening liquidity conditions.

Bottom Line

• Neutral to slightly bullish outlook, with gold supported by geopolitical risks and central bank buying but capped by high real rates.
• Downside risks include continued USD strength, higher Treasury yields, and weaker jewelry demand.
• Potential upside catalysts include a dovish Fed pivot, increased central bank buying, or an escalation in geopolitical tensions.

Silver (XAG) Fundamental Outlook – Short to Medium Term

1. Monetary Policy & Interest Rate Impact

• Silver remains highly sensitive to Fed policy, with market participants closely monitoring rate expectations.
• The Federal Reserve is expected to hold rates steady in the near term, with potential cuts later in 2025.
• Real interest rates remain elevated, limiting major upside for silver, which competes with yield-bearing assets.
• A weaker USD could provide tailwinds for silver prices, particularly if inflation expectations rise.

2. Industrial Demand & Supply

• Industrial demand accounts for over 50% of silver consumption, making it more cyclical than gold.
• Demand from the solar panel industry remains strong, as silver is a key component in photovoltaic cells.
• Electronic and EV-related silver demand is increasing, though economic headwinds could slow growth.
• Global silver mine production is stable, with no significant supply shocks expected in the near term.

3. Investment Demand & Market Positioning

• ETF holdings have remained stable, with some long positions increasing on speculation of Fed easing.
• Hedge funds have maintained moderate long positions, but sentiment is mixed due to high real rates.
• Speculative positioning is slightly bullish, but silver remains vulnerable to macroeconomic uncertainty.

4. Geopolitical & Trade Risks

• Geopolitical risks (U.S.-China tensions, Middle East conflicts, and global trade disruptions) support safe-haven demand.
• Any escalation in geopolitical uncertainty could drive short-term spikes in silver prices.
• U.S. trade policies may impact industrial silver demand, particularly if tariffs affect manufacturing sectors.

5. Other Relevant Factors

• Silver’s correlation with gold remains strong, meaning any upside in gold could support silver.
• The silver-to-gold ratio remains historically high, suggesting potential room for silver outperformance.
• Central bank purchases are less of a driver for silver, unlike gold, making industrial demand a more critical factor.

Bottom Line

• Neutral to slightly bullish outlook, with Fed policy and industrial demand key to silver’s performance.
• Downside risks include higher real rates, slower industrial demand, and USD strength.
• Potential upside catalysts include Fed rate cuts, stronger gold prices, and increased demand from the solar/EV industries.

Platinum (XPT) Fundamental Outlook – Short to Medium Term

1. Supply & Production Trends

• Global platinum production is stable, but geopolitical risks in key mining regions (South Africa, Russia) remain a concern.
• South Africa remains the largest supplier, but persistent energy shortages (load shedding) are disrupting mining output.
• Recycling supply is increasing, as higher platinum prices encourage secondary market inflows.
• Potential labor disputes in South Africa could further tighten supply, adding upside risk to prices.

2. Industrial & Automotive Demand

• Platinum demand from the automotive sector remains strong, with increased use in catalytic converters for emissions reduction.
• Stricter emissions regulations in Europe and China are boosting platinum demand, as automakers transition from palladium-heavy catalysts to more cost-effective platinum-based solutions.
• Hydrogen fuel cell development is a long-term demand driver, as platinum is a key component in hydrogen electrolysis and fuel cells.
• Industrial demand (chemical, petroleum, and electronics sectors) remains steady, with some upside from emerging markets.

3. Investment Demand & Market Positioning

• Investor demand for platinum ETFs has been volatile, reflecting uncertainty around supply and Fed rate expectations.
• Hedge funds and speculators have increased net long positions, anticipating supply disruptions and stronger industrial demand.
• Platinum’s correlation with gold remains positive, meaning macroeconomic trends affecting gold also influence platinum prices.

4. Geopolitical & Trade Risks

• Russian sanctions remain a supply risk, though alternative supply channels have mitigated major disruptions so far.
• Potential South African export restrictions could impact global availability, though no policy changes are confirmed.
• China’s economic slowdown poses a risk to industrial demand, particularly in the automotive and electronics sectors.

5. Other Relevant Factors

• Platinum remains undervalued relative to gold and palladium, making it attractive for diversification in precious metals portfolios.
• The Fed’s rate decision will impact investment flows, with lower rates likely boosting demand for non-yielding assets like platinum.
• Platinum’s role in green energy continues to grow, with hydrogen economy advancements providing long-term structural support.

Bottom Line

• Neutral to slightly bullish outlook, driven by strong automotive demand, supply risks, and long-term hydrogen energy applications.
• Downside risks include weaker Chinese industrial activity, reduced auto sector demand, and potential easing of supply constraints.
• Potential upside catalysts include supply disruptions in South Africa, stronger investor demand, and increased use in hydrogen fuel cells.

Agricultural Commodities – Fundamental Outlook (Short to Medium Term)

1. Supply & Production Trends

• Grain markets remain under pressure, with global wheat and corn supplies improving due to strong harvests in key producing regions.
• South America’s soybean production is expected to rise, driven by favorable weather in Brazil, though Argentina’s output remains uncertain.
• U.S. corn and wheat production have recovered, with USDA projections indicating higher-than-expected stock levels.
• Drought conditions in key farming regions have eased, improving yield forecasts for major crops.

2. Demand & Global Consumption

• China’s agricultural imports remain mixed, with soybean demand recovering but weaker grain purchases due to higher domestic reserves.
• Global wheat demand is stable, though increased competition from Russian and Ukrainian exports has weighed on U.S. prices.
• Ethanol production has supported corn demand, but lower fuel prices could slow biofuel-related consumption growth.
• Coffee and sugar demand remains strong, particularly in emerging markets, despite recent price volatility.

3. Market Sentiment & Positioning

• Hedge funds have reduced long positions in grains, reflecting expectations of strong harvests and improving supply conditions.
• Agricultural futures markets have seen increased volatility, particularly in soybeans and corn, as traders assess weather impacts and Chinese demand.
• Speculative positioning remains cautious, with investors waiting for clearer supply-demand signals before making larger bets.

4. Geopolitical & Trade Risks

• U.S.-China agricultural trade remains a key uncertainty, with potential tariff adjustments impacting soybean and corn exports.
• The Russia-Ukraine conflict continues to affect grain exports, though recent Black Sea shipments have been less disrupted than expected.
• Weather-related risks remain a factor, with the possibility of El Niño/La Niña developments affecting global crop yields.
• Export restrictions from major producers (India on rice, Argentina on soybeans) could create short-term supply shocks.

5. Other Relevant Factors

• Currency fluctuations are impacting agricultural markets, with a stronger USD making U.S. crops less competitive globally.
• Input costs for farmers (fertilizers, fuel) have stabilized, reducing cost pressures and supporting production growth.
• Shifts in dietary preferences and plant-based food trends could influence long-term demand for soy and other alternative proteins.

Bottom Line

• Neutral to slightly bearish bias, with strong supply conditions keeping prices in check.
• Downside risks include further improvements in global harvests, weaker Chinese demand, and a stronger USD.
• Potential upside catalysts include weather disruptions, geopolitical trade restrictions, and increased biofuel demand.

S&P 500 Fundamental Outlook – Short to Medium Term

1. Market Performance & Sentiment

• The S&P 500 recently hit a fresh all-time high (6118), but market volumes remain 16% below the 20-day moving average, indicating a more cautious investor stance.
• Fear/greed sentiment has shifted back to neutral, with positioning still lighter than early-year highs.
• Earnings season is the main market driver, with expectations for 8% YoY EPS growth, significantly higher than the previous quarter’s 3% growth.
• Liquidity conditions are improving, with corporations exiting the blackout period, leading to an expected 30% increase in buyback execution.
• CTA models indicate an $11 billion demand for U.S. equities over the next five sessions, providing a short-term tailwind for the index.

2. Monetary Policy & Federal Reserve Impact

• The Fed is expected to hold rates steady, with markets pricing the first rate cut around mid-2025.
• Investors remain focused on Trump’s policy stance toward the Fed, as he has signaled desires for lower interest rates.
• Higher real yields continue to cap valuation multiples, though any dovish shift from the Fed could support further equity upside.
• U.S. inflation expectations have stabilized, reducing immediate fears of a Fed tightening cycle resumption.

3. Earnings & Corporate Sector Trends

• 41% of the S&P 500’s market cap reports earnings this week, providing a clearer picture of corporate health.
• Mega-cap tech earnings remain crucial, as discretionary sector positioning remains net positive while hedge funds continue to sell tech winners post-earnings.
• The semiconductor sector remains under pressure, with weakness in analog chips and automotive demand dragging on forecasts.
• Healthcare and financials have been notable outperformers, attracting buying from long-only funds.

4. Market Positioning & Flows

• Hedge funds are net sellers, with outflows concentrated in tech, financials, and discretionary names.
• Long-only funds (LOs) have been net buyers, focusing on discretionary, healthcare, and financials.
• Macro funds are reducing equity exposure, reallocating to fixed income and alternative assets.
• ETFs represent 27% of total trading volume, which is below historical averages, reflecting lower retail and passive investor engagement.

5. Geopolitical & Policy Risks

• U.S.-China trade tensions remain a key risk, though Trump’s recent comments suggest he may avoid aggressive tariffs in the near term.
• Potential fiscal stimulus measures, including corporate tax cuts, could be market supportive, though inflationary risks remain.
• Upcoming political uncertainty surrounding the U.S. election could impact sentiment, particularly if fiscal policies diverge between candidates.

6. Other Relevant Factors

• VIX remains subdued (~15), indicating low implied volatility despite upcoming earnings risks.
• Fixed income markets remain a key driver, with the U.S. 10-year yield holding around 4.6%.
• Bitcoin and alternative assets continue to trade with high correlation to equities, with BTC recently retreating from highs.
• The S&P 500 remains overbought on a short-term basis, but positioning is not excessively stretched.

Bottom Line

• Neutral to slightly bullish outlook, supported by strong earnings momentum, corporate buybacks, and lighter investor positioning.
• Downside risks include higher-for-longer Fed rates, weak tech earnings, and political uncertainties.
• Potential upside catalysts include Fed rate cut signals, stronger-than-expected corporate earnings, and further buyback activity.