The S&P 500 saw a steady rise throughout the week, supported by a reduction in US-China tariffs. The index managed to maintain an upward trajectory without any disruptions.

On Friday, stock market figures revealed gains across several indices. The S&P 500 increased by 0.7%, the Nasdaq Composite by 0.45%, the Russell 2000 by 0.9%, the Dow Jones Industrial Average by 0.7%, and the S&P TSX Composite by 0.3%.

Weekly Trends

For the entire week, the trends continued with the S&P 500 rising by 5.1%. The Nasdaq Composite saw a 7.0% increase, and the Russell 2000 grew by 4.5%. The Dow Jones Industrial Average encountered a minor setback with a 0.2% decrease. However, the S&P TSX Composite experienced a 2.4% gain over the week.

These figures point to fairly robust engagement in equities, particularly those with a more pronounced focus on growth. The bulk of the upward motion last week reflected broad institutional confidence in trade-related easing, notably the recent tariff shifts between the United States and China. This kind of data often triggers renewed buying interest, especially from participants who regard geopolitical progress as an early signal for margin-friendly conditions. It’s not just sentiment—it’s reaction to measurable change.

Cyclicals outperformed, particularly those tied to consumer demand and small-cap exposure. The Russell 2000’s advance was greater than that of its larger peers, and that often suggests increased appetite for risk. Larger multinational names, especially those with heavy overseas revenue, benefited from what appeared to be forex tailwinds at various points in the week. Balance sheet strength continues to matter less in the short term versus momentum and sector rotation.

During the week’s close, breadth remained supportive. Advancers outpaced decliners without heavy intraday pullbacks, indicating there wasn’t widespread hesitation even going into the weekend. That’s rare with mixed earnings outlooks on the horizon. Options flow helped to validate this. We witnessed call contracts being heavily favoured in large-cap tech, pushing short-dated implied volatility slightly above realised metrics in those instruments. That’s a very specific detail, but one that tells us speculative positioning is ongoing beneath what seems like quiet accumulation.

Powell’s earlier remarks on interest rates still weigh on bond-equity correlations, though their effect appears softened by tariff optimism. His prior tone struck markets as mildly accommodative, and that sentiment lingers. Yields remain under close watch. Thirty-year government bond pricing hints at uncertainty about how long the Federal Reserve maintains its current stance. Volatility in longer-dated futures didn’t spike to uncomfortable levels, but the curve remains tightly clustered around the near-term midpoint, which implies potential for sudden repricing if fresh data wavers. We’ve used that as a gauge for option gamma trend shifts before.

Market Strategies

Traders who rely on volatility structures would have noticed the reduced skew on indexes, further indicating a muted perception of downside risk in the shorter term. But that’s not to suggest protection selling is the optimal course. Rather, it’s a window to reassess exposure to convexity—particularly when event risk is compressed into Fed commentary expected within days. There’s little margin for error if sentiment breaks due to unfavourable jobless claims or surprise inflation pressures.

We don’t lean too hard on seasonal directionality, but patterns do suggest this stage of the year often allows for tighter trading ranges—until one catalyst breaks expectations. Macro hedge funds appear to be staying light, avoiding fixed directional exposure now that most of the good news has been priced in. That opens avenues for smaller volatility spikes to have outsized impact on positioning. At the same time, equity volatility remains low across benchmarks, and that provides opportunities to construct asymmetrical payoffs using shorter duration spreads with controlled debit.

One can also interpret Friday’s price action as a test of conviction. After a sharp week of gains, markets showed no knee-jerk reversal in after-hours futures or overseas index movement. That matters. It gives market participants a line in the sand—a rough measure of where dip-buying begins if we do encounter a retracement ahead of the next CPI release.

As a group, we’re planning for range-bound trading through the immediate term, but staying responsive. Elevated realised correlations last week show that basket trades are still in vogue and could remain sensitive to tech earnings in particular. Probability-weighted setups involving paired long and short optionality could help soften potential whiplash. And it wouldn’t hurt to widen hedges late in the session on key economic days.

At the moment, all eyes will naturally turn to incoming PCE data and whether disinflationary signs continue. But the earlier reaction to softer growth metrics shows participants are willing to overlook short-term weakness if broader political and trade signals trend positively. That sets up an environment where short gamma exposure could be punished rapidly if complacency creeps in.

Keep contract positioning nimble. The cost of misreading the next set of data surprises could outweigh the benefits of maintaining static outlooks.

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