The State of Markets: “Equities – Risks Rising”
“Actual risk is inversely proportional to perceived risk”
Source: Harry Lange, ex Fidelity Magellan Portfolio Manager
US equities have squeezed higher again this week, with new highs in the S&P500 & NASDAQ100 (just), as well as on the Philly SOX (amongst others). With that, implied volatility has fallen further (e.g. see the VIX); European equities have added to their gains & made new highs; while sentiment and positioning have become more bullish (e.g. with low/falling levels of downside put protection in portfolios).
For now, therefore, markets have ignored the poor newsflow, including Trump’s multiple new tariffs announcements this week (e.g. with respect to Canada & Brazil, amongst others); while, according to Wednesday’s Fed minutes, FOMC members are increasingly divided about the timing of further rate cuts.
Of interest, in that respect, our SELL-off indicator has continued to march higher in recent trading days. That’s indicative of persistent risk appetite in global markets, and suggests that equities are now vulnerable to negative newsflow. That indicator is shown in the chart below, and is designed to warn of waves of risk aversion (when it crosses above its +20 threshold). For detailed analysis of our ‘Tactical’ 1 – 4 month views on US and global equities, see our latest ‘Longview Alert’ (Tactical publication), which was published on Thursday.
Key data and events this coming week will, as always, be watched closely. In particular, it’s ‘inflation week’, with June CPI reports for the US (Tuesday); UK (Wednesday); Japan (Friday); and various Eurozone economies throughout the week (including Spain on Tuesday, Italy on Wednesday). Elsewhere, US retail sales for June are due (Thursday) along with the first July estimate of Michigan Sentiment (Friday). In Europe, German ZEW data is out (Tuesday), while BoE Governor Bailey delivers his annual Mansion House Speech (Tuesday). It's also the start of Q2 earnings season next week, which begins in earnest on Tuesday with US banks (including JPMorgan, Wells Fargo, Citigroup, & BNY Mellon, with more on Wednesday, e.g. Morgan Stanley & Goldman Sachs). Please see below for a full list of key macro data and events this coming week.
Key chart: Longview SELL-off indicator vs. S&P500
Upcoming important data/events this week:
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Events: |
BoE Governor Bailey delivers Mansion House Speech (Tues, 9pm); Fed releases Beige Book (Wed, 7pm). |
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Monday: |
Chinese imports/exports, & trade balance (June, 4am). |
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Tuesday: |
US headline & core CPI (June, 1:30pm); Chinese GDP (Q2, 3am). |
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Wednesday: |
UK Headline & core CPI, RPI & PPI (June, 7am); US headline & core PPI (June, 1:30pm). |
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Thursday: |
US retail sales (June, 1:30pm). |
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Friday: |
US Michigan Sentiment (July first estimate, 3pm); Japanese headline & core CPI (June, 12:30am). |
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Key earnings: |
JPMorgan, Wells Fargo&CO, BlackRock, Citigroup, BNY Mellon (Tues); J&J, Bank of America, Morgan Stanley, Goldman Sachs (Wed) Netflix( Thurs) American Express (Fri). |
Key Research
The SHORT VIEW (& market positioning), 7th July 2025:
“SELL YEN (& BUY USD, EUR or CHF?)”
Speculative positioning in the Japanese YEN has shifted sharply in the past 12 months.
In July last year, positioning was at record net SHORT levels (highest on record, even higher than in mid-2007 – FIG C). By week 17 this year that had swung to a record net LONG.
Similarly, the percentage of open interest in USDJPY futures, which were LONG Yen contracts, has also moved sharply, from low levels in the middle of last year (at around 23%) to a peak of 83% in May (highest on record).
Key North American macro data & events:
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Events: |
Speeches by the Fed's Barr on financial inclusion (Tues, 5:45pm), Collins at NABE event (Tues, 7:45pm), Barkin in Baltimore (Tues), Logan on the economy (Wed, 12:45am), Hammack on community development (Wed, 2:15pm), Barr on financial regulation (Wed, 3pm), Williams on economic policy (Wed, 10:30pm), Barkin in Westminster (Wed), Kugler on housing market and economic outlook (Thurs, 3pm), Daly on BTV (Thurs, 5:45pm), Cook on artificial intelligence and innovation (Thurs, 6:30pm) & Waller on economic outlook (Thurs, 11:30pm); Fed releases Beige Book (Wed, 7pm). |
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Monday: |
Canadian manufacturing & wholesale sales (May, 1:30pm). |
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Tuesday: |
US headline & core CPI (June, 1:30pm); US Empire manufacturing (June, 1:30pm); Canadian headline & core CPI (June, 1:30pm); Canadian existing home sales (June, 2pm). |
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Wednesday: |
Canadian housing starts (June, 1:15pm); US headline & core PPI (June, 1:30pm); US New York Fed service sector business activity (July, 1:30pm); US industrial & manufacturing production & capacity utilisation (June, 2:15pm). |
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Thursday: |
US retail sales (June, 1:30pm); US imports and exports price index (June, 1:30pm); US weekly jobless claims (1:30pm); US Philadelphia Fed business outlook (July, 1:30pm); US business inventories (May, 3pm); NAHB homebuilders index (July, 3pm); US total TIC flows (May, 9pm). |
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Friday: |
US housing starts & building permits (June, 12:30pm); US Michigan Sentiment (July first estimate, 3pm). |
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Key earnings: |
Fastenal (Mon); JPMorgan, Wells Fargo&CO, BlackRock, Citigroup, BNY Mellon (Tues); J&J, Bank of America, Morgan Stanley, Goldman Sachs, Progressive, Prologis, PNC Financial, Kinder Morgan (Wed); Netflix, GE Aerospace, Abbott Labs, PepsiCo, Marsh McLennan, Cintas, Elevance Health, U.S. Bancorp, Travelers (Thurs); American Express, Charles Schwab, 3M, Truist Financial Corp, Schlumberger (Fri). |
Fig B: US inflation (Y-o-Y %), split by services, durable goods, & nondurable goods
Key European macro data & events
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Events: |
Speeches by the ECB's Vujcic in Zagreb (Mon, 8:30am) & Villeroy in Paris (Wed, 9am). |
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Monday: |
N/A |
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Tuesday: |
Spanish home sales (May, 8am); Spanish headline & core CPI (June final estimate, 8am); Eurozone industrial production (May, 10am); German & Eurozone ZEW survey – expectations & current situation (July, 10am). |
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Wednesday: |
Italian headline & core CPI (June final estimate, 9am); Eurozone & Italian trade balances (May, 10am). |
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Thursday: |
Eurozone headline & core CPI (June final estimate, 10am). |
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Friday: |
German PPI (June, 7am); Spanish trade balance (May, 9am); Eurozone current account balance (May, 9am); Italian current account balance (May, 9:30am); Eurozone construction output (May, 10am). |
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Key earnings: |
ASML Holding (Wed). |
Fig C: EZ headline & core CPI (Y-o-Y %), shown with recession bands
Key UK macro data & events
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Events: |
The Bank of England's Bailey delivers Mansion House Speech (Tues, 9pm). |
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Monday: |
N/A |
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Tuesday: |
BRC retail sales (June, 12:01am). |
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Wednesday: |
Headline & core CPI, RPI & PPI (June, 7am); Land Registry house price index (May, 9:30am). |
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Thursday: |
Employment, jobless claims & average weekly earnings (June/May, 7am). |
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Friday: |
N/A |
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Key earnings: |
N/A |
Fig D: UK headline & core CPI (Y-o-Y %), shown with recession bands
Key Asia-Pacific macro data & events
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Events: |
N/A |
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Monday: |
Japanese machinery orders (May, 12:50am); Chinese imports/exports, & trade balance (June, 4am); Japanese industrial production & capacity utilisation (February final estimate, 5:30am); Chinese total social financing, new yuan loans, and M0, M1 & M2 money supply (June, 11am). |
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Tuesday: |
Australian Westpac consumer confidence (June, 1:30am): Chinese new & used home prices (June, 2:30am); Chinese GDP (Q2, 3am); Chinese activity data (industrial production, retail sales, fixed asset, property investment & unemployment rate – June, 3am). |
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Wednesday: |
N/A |
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Thursday: |
Japanese imports/exports, & trade balance (June, 12:50am); Australian employment data (June, 2:30am). |
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Friday: |
Japanese headline & core CPI (June, 12:30am). |
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Key earnings: |
N/A |
Fig E: Japanese Headline CPI (shown with pp. contributions from key categories)
This week:
Longview on Friday, 11th July 2025:
“Small & Midcap Equity Indices: US vs. Europe”
Longview 'Tactical' Alert No. 92, 10th July 2025:
“Remain ‘Tactically’ Cautious Equities: Summer Turbulence Ahead”
The SHORT VIEW (& market positioning), 8th July 2025:
“SELL YEN (& BUY USD, EUR or CHF)”
Last week:
Longview on Friday, 4th July 2025:
“US Labour Market: Resilient or Rolling Over?”
Tactical Equity Outlook, 3rd July 2025:
“Equities: Short Term Turbulence Ahead, a.k.a. Temporarily Remove Tactical OW”
Monthly Global Asset Allocation No. 67, 2nd July 2025:
“US Small & Mid Caps: Buy Case Brewing, A.k.a. (still) a Two Tier Economy”
The SHORT VIEW (& market positioning), 1st July 2025:
“Gold: Golden No More”