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It’s been the best of macro worlds this summer—growth surprising to the upside, inflation soft, and financial conditions easing. But Goldilocks rarely lingers; history shows this sweet spot tends to cool before long, leaving markets to navigate a less forgiving backdrop.
A tsunami of buying has pushed risk sentiment and positioning to extremes—from vol-control flows to record retail leverage. But warning lights are flashing: stretched sentiment, 100th percentile CTA longs, seasonality risk, and a market running out of hedges. Be careful out there.
Super-sized $170bn in new border/immigration funding to turbo charge “the largest mass deportation operation in US history”. Border/immigration funding now dwarfs the rest of US federal law enforcement combined.
Trump calls this “the biggest deal ever reached.” Deutsche Bank says that the deal is a relief. FT quotes a diplomat saying that there is no hiding of the fact that EU got rolled over by the Trump juggernaut. One European CEO says that "I’m embarrassed to be European today. Let's have a one-sided look on Europe's weakness.
US and Chinese officials meet in Stockholm this week, but it's not just the diplomats warming up—investors seem to have caught a case of "Stockholm syndrome" too. Despite geopolitical friction and years of underperformance, Chinese stocks are suddenly being embraced again.