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Negotiation efforts around two of today’s most critical conflicts – Russia and Ukraine, and Israel and Hamas – feel like rowing a boat tied to a dock: there is movement, but no real progress. Ceasefire talks continue, and some common ground seems to be emerging; however, the bloodshed shows no signs of ending.
And if that were not enough, another almost forgotten black swan resurfaced: tensions between India and Pakistan, both possessors of nuclear weapons, soared last week. However, given the catastrophic consequences of a direct confrontation, it is likely that, as on previous occasions, the worst will be avoided.
Trade negotiations have not been much more productive either, especially those between the United States and China. While Beijing assured last week that it is not actively negotiating with Washington on tariffs, there have been signs of detente. At best, both sides seem to be expressing renewed interest in dialogue.
Against this backdrop, it is not surprising that XAUUSD—a traditionally safe-haven asset—remains near all-time highs. It is worth noting that Bitcoin, which some tend to call digital gold, has not performed poorly of late, surpassing the $90,000 barrier, but it remains to be seen how long this correlation will hold.
As for what to expect from the markets, if we start to see not just words but real steps in resolving any of these three conflicts + trade war between the US and China, financial markets, especially riskier assets, could rebound with renewed energy. But if diplomacy stalls, investor confidence is likely to deteriorate.
Looking ahead to this week, aside from ongoing geopolitical risks, investors will be keeping a close eye on quarterly earnings reports. The focus (for obvious reasons) is on the big tech companies – Meta, Microsoft, Amazon, and Apple, with special attention on Apple stock performance due to its exposure to the US-China trade dispute.
On the bright side, markets are already bracing for weak results. Therefore, if earnings are better than expected or companies’ prospects are cautiously optimistic, we could see a return of risk appetite. Lastly, today, Tuesday, marks 100 days since Trump’s return to the White House: expect plenty of headlines.
