Insights 
VT 
US economic data showed August ISM manufacturing at 48.7, below the expected 49.0, and July construction spending unchanged at -0.1%. The S&P Global final manufacturing PMI for August was 53.0, slightly under the preliminary 53.3. Canada’s PMI for August rose to 48.3 from a prior 46.1. President Trump mentions a Supreme Court challenge regarding a tariff decision and notes changes in Space Command’s location. ECB’s Muller sees sense in holding rates, while the Atlanta Fed’s Q3 GDP tracker dipped to 3.0% from 3.5%. Goldman Sachs adjusted US Q3 growth forecast to 1.7%.
Gold made notable movements, rising by $62 to settle at $3538, indicating a breakout from a period of consolidation since April. The US 10-year yields increased by 5.6 basis points to 4.97%. The S&P 500 went down by 48 points, reaching 6412. WTI crude oil fluctuated, ending up $1.63 at $65.64 per barrel.
Equity Market Movements
In equity markets, the drop saw financials and transports underperforming, with Nvidia and Tesla recording declines of 1.8% and 1.4%, respectively. The USD showed strength but was volatile, notably in its movements against the JPY, which saw a retracement and resurgence throughout the trading session.
Given the sharp breakout in gold, we should consider bullish positions to capture further momentum. This move above $3500 confirms the end of the consolidation that began back in April and could signal a new leg up. Central bank gold purchases, which hit a record of over 1,000 metric tons annually back in 2022-2023, likely provided the long-term floor for this rally.
The weakness in equities, coupled with a contracting manufacturing sector, suggests it is prudent to hedge against more downside. The US ISM Manufacturing PMI has now been below the crucial 50-point mark for 12 of the last 18 months, indicating a persistent industrial slowdown. We can look to buy put options on the S&P 500 or call options on the VIX to protect portfolios from a further risk-off slide.
Yield and Dollar Strategies
With 10-year yields pushing 5%, the pressure on both stocks and bonds is intensifying. This reflects the sticky inflation environment we have dealt with since the Federal Reserve’s “higher for longer” policy stance became clear in 2024. Betting on yields remaining elevated through options on bond ETFs would be a logical follow-through trade.
The strong US dollar is acting as a classic safe-haven asset amid the uncertainty. The re-emergence of tariff rhetoric adds a layer of political risk that historically benefits the dollar against other currencies. We see an opportunity in maintaining long USD positions, particularly against the yen, which continues to show broad weakness.
