Global equities are digesting the Trump administration's latest tariff barrage on steel and aluminum. Fed Chair Jerome Powell's Senate Banking Committee testimony begins today and continues into Wednesday, along with multiple Fed speakers and more executive orders, are keeping traders on edge. Additionally, the US CPI (read: here) will be published on Wednesday, adding to the flurry of events for investors and traders.
In the thick of chaos, traders often lose sight of the key themes shaping the markets. To refocus, Goldman's Oscar Ostlund outlined seven critical themes that should be top of mind for investors this week:
Geopolitics are back: Aside from the onset of the Ukraine invasion, geopolitics had taken the backseat in markets for the past few years. That's not the case anymore, as weekly tariff headlines take the driver's seat. Trade wars are a key focus, albeit most investors see the current tariffs as relatively temporary.
Inflation fears are back: The biggest worry investors have regarding the US Exceptionalism theme is sticky inflation (27%). With breakevens making new highs, talks about overheating are likely to rise...
Gold is the ultimate USD long: While the USD stronger theme has very strong backing, nothing beats the long Gold one: bulls outnumbered bears by more than 5 to 1. With breakevens rising and trade/currency wars brewing, Gold is the ultimate safe haven.
China Rebound: Investors continue to have rather bullish China equity views, buoyed both by fiscal support and the local AI story. With the USD stronger theme persisting and China rates at decade lows, shorting the RMB is the favorite pair trade against the long China equities.
Next phase in AI: DeepSeek, combined with cloud revenue misses, punctured a tire in the AI investment thesis: capital may be no moat after all, and maybe a liability... Investors are still positive on aggregate. But ROI prospects are a growing concern (cited by 44% as the biggest risk to the AI trade) and investors are being more selective about which subsectors would benefit the most. With roughly half of respondents planning to rebalance from Mag 7 positions into defensives or international stocks (49%), the theme is normalizing. (Here is a 15min mark-to-market on sentiment and positioning for this theme).
Oil bearishness: Finally, investors seems to be rallying around the bearish oil view. This is actually one of the most bearish levels in our 8-year history...
Bitcoin institutionalization: The days of institutional investors not getting anywhere close to crypto are definitely over. It's now fully investable and the creation of the US sovereign wealth fund may be the next catalyst...
Ostlund also provided clients with the survey results of 768 institutional investors conducted last week. The results show how smart money is mostly focused on geopolitical events.
Looking ahead to the next big geopol event... Read this: "Trump Says Hamas Must Free All Hostages By Saturday Noontime Or 'All Hell Will Break Loose'."
