US equity and bond traders live in two different worlds! | MarketTalk: What’s up today? | Swissquote

Show notes

The week kicks off on positive geopolitical vibes as the weekend talks between the US and China went well, and more senior level talks, including Xi Jinping are expected in the next few hours.
The S&P500 and Nasdaq both fell on Friday, but the S&P500 ended last week having gained 2.6%. It was the 5th straight week of gains for the S&P500, while Nasdaq closed the week 3.3% higher than where it had started. Both indices are now at the highest levels since last spring, and both are in overbought territory. Volatility continues fading, while any investors questions whether this is the calm before storm.
One good thing is that the Fed’s reverse repo operations are trending lower, as a result of a flood of US bond issuance following the debt ceiling agreement and keep market liquidity sustained for equities.
But the US 2-year yield is headed toward the 5% mark and the widening spread between 2 and 10-year yield warns that bond investors continue pricing in recession in the foreseeable future, which is, in theory, negative for equity valuations as well.
Big Tech is responsible for around 80% of the gains in the S&P500 this year due to the AI-rally, but Russell 2000 gives signs of willingness of joining the rally as well. And because there is nothing much encouraging happening on the Fed end, the overall direction of the market, and market mood, will depend on the performance of the Big Tech. And they are now in the overbought market.
The US dollar trades below its 50-DMA as the EURUSD is on track for further gain. Cable consolidates above the 1.28 mark ahead of the next inflation update, due Wednesday and the next Bank of England (BoE) decision due Thursday, while the USDTRY remains – is kept - steady around the 23 mark, as the Turkish Central Bank is expected to hike the one-week repo rate from 8.5% to 20% when it meets this week.
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