Will Trump’s Energy Play Shake Up Markets?
Markets on the Move: Europe’s Defense Surge, Trump’s Oil Play, and a Shaky Dollar
DAX is up 15% YTD as German elections approach, while European bond yields are surging on expectations of a $3 trillion defense spending package. Trump’s refusal to fund NATO unless Europe steps up creates a vacuum, but it’s a strategic masterstroke, keeping demand for U.S. defense goods high without spending American tax dollars. Markets are watching defense stocks closely.
Trump’s Oil Gamble: The Big Question, Pump or Dump?
Trump’s apparent deal with Putin revolves around oil, a strategy to sideline Iranian supply while pressuring Saudi Arabia and Russia to get crude below $60. Why? Because U.S. fracking isn’t profitable at those levels.
With oil in backwardation (futures pricing lower than spot), the market is screaming “Drill, Baby, Drill” to get crude below $60. Why? Because U.S. fracking isn’t profitable at those levels. Central bank rate cuts are in jeopardy.
Is Trump Top Cat or Officer Dibble?
Markets aren’t sure whether Trump is the cunning leader (Top Cat) or the law-abiding enforcer (Dibble). The expectation? Big talk, but less action. The real test comes April 1st, when details on reciprocal tariffs drop. Until then, global equities are rallying on dollar weakness and lower risk premiums as conflicts get sorted.
Technical & Sentiment Breakdown: What’s Next for the Dollar and Equities?
Bond Yields Rising
Markets are repricing expectations as Europe prepares to issue potential Euro-Bonds for defense spending.
Gold Pauses at ATHs ($3,000 in Sight?)
A 2% pullback before a grind higher? War premiums may be fading.
Intel Posts Best Week Since 1982
Signs of life beyond the Mag7?
Last Week’s Market Recap
U.S. Inflation Surprise
CPI and PPI came in hotter than expected, initially pushing bond yields up and rate cut expectations down. But digging into the detail saw lack of inflation in the things that feed the FED’s preferred PCE inflation measure and saw US yields fall back again.
Tech’s Massive Comeback
Hedge funds flipped from underweight to aggressively buying semiconductors and software.
Retail Traders Jumping In
VIX remains low, indicating Wall of Worry rally potential.
Defense Stocks Surge In
Rheinmetall, Saab, BAE among the biggest winners. Don’t forget potential for industrial rebuild in Ukraine...that could boost a sector which is 11% of Europe’s markets.
The Week Ahead: Key Events to Watch
1. Feb 18th
RBA rates decision
2. Feb 19th
FOMC minutes
3. Feb 20th
U.S. Initial Jobless Claims & Philly Fed Index
4. Feb 21st
Global PMI Data & Michigan Inflation Expectations
5. Feb 23rd
German Elections, Market implications on Euro & DAX
6. Earnings to Watch
HSBC, Rio Tinto, Walmart, Alibaba, Booking.com
Actionable Takeaways: Where Are the Big Trades?
Equities
If defense spending pushes forward, European stocks could see more upside.
Commodities
Oil volatility is a trader’s paradise, watch for key support levels near pre-Ukraine war prices.
Bonds
Rising yields are pressuring risk assets, but if inflation surprises lower, expect a sharp reversal.
Final Thought: Are Markets Too Complacent?
With tariffs looming, Trump’s energy maneuvers in motion, and global defense budgets soaring, are traders too comfortable with the current low-volatility environment? This could be the biggest Wall of Worry rally yet. Stay nimble, watch for Trump headlines, and don’t ignore the bond market’s message.
AtlantaGDP Now came in at 2.3% from 2.9% on Friday reflecting lower inventories and retail sales both affecting economic activity…keep looking at the data for signals.
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