Insights 
VT 
The S&P 500 struggled to extend gains and fell short of a crucial support level, only to rebound before the day’s end. This resilience was remarkable given the risk-averse climate prevailing in the market. The index is still in a range, suggesting that more decisive closing activity is anticipated. Opening weakness should be short-lived, with sector rotations expected.
Trade Tensions Impacting Markets
Recent trade tensions between the US and China have impacted various markets. President Trump indicated there would be no further discussions with China’s Xi Jinping. As a result, gold prices surged to around $4,020, reflecting its role as a safe-haven asset. The US Dollar faced selling pressure amid negative trade headlines. Bitcoin trades above a support range between $120,000 and $121,000, while altcoins like Ethereum and Ripple are near critical support levels.
Tariffs remain a key tool in the US foreign policy arsenal, serving as a significant source of public finance. Despite new developments, the US government has recently reinforced its reliance on tariffs. Litecoin presented a bullish trajectory, trading around $130. It registered gains for two days straight, overcoming broader market volatility.
The S&P 500 is clearly struggling for direction, failing to make a decisive move after today’s options expiration. We see the market coiling in a tight range, with the CBOE Volatility Index (VIX) holding stubbornly above 18, reflecting this underlying uncertainty. This environment suggests that selling volatility through neutral strategies like iron condors could be profitable as long as the index remains directionless.
We believe the market’s hesitation stems from the last inflation report, which showed core CPI at an annualized 3.2%, slightly too high for the Federal Reserve to signal a definitive policy pivot. This dynamic feels similar to the indecision we experienced back in 2023, where every data point caused sharp but short-lived reactions. For now, this means any breakout fueled by weaker economic data could be a false move, making it wise to be cautious with directional bets.
Shifting Market Leadership
The conversation is shifting to sector rotations, and we feel continued leadership from mega-cap tech is unlikely given current valuations and recent antitrust chatter from Washington. In contrast, industrial and energy sectors are showing more resilience, supported by the ongoing onshoring trend and global supply constraints that have kept WTI crude oil above $85 per barrel for most of the year. We are looking at call spreads on industrial ETFs as a way to position for a potential shift in market leadership.
The ghosts of the Trump-era trade wars are being felt again, though the focus has now shifted to stalled negotiations over critical mineral access with a bloc of South American countries. We have seen how such geopolitical tensions can spark a sudden flight to safety, just as they did in the 2018-2019 period. This makes holding some protective puts on the broader market or having exposure to gold, which has been consolidating near $2,700 an ounce, a sensible hedge for the coming weeks.
