Will It Stick?

A Tricky Tape

The markets enjoyed their first week of relative calm in nearly a month. President Trump stepped in, talked about de-escalation in Chinese tariffs and we got a relief rally in both stocks and bonds. The VIX is down to around 25, which doesn’t necessarily indicate a calm & normal environment, but it’s much better than the levels it was at just a few weeks ago. All of this points to at least a short-term improvement in sentiment and a generally good week for investors.

The problem is that we don’t know yet if this is going to stick. The rhetoric has always changed rapidly throughout 2025 and it’s reasonable to think that it will again soon. I think the bond market is reading this right here and refusing to go straight into rally mode. If the market were confident that long-term tariff risk is low, I think we’d see yields go lower here as inflation risk slowly comes off the table. We’re not seeing that yet though. The 10-year is still about 40 basis points above where it was in early April before Asia started dumping Treasuries. I think yields are still elevated because bond traders are nervous that this could all reverse pretty quickly.

Gold is definitely looking like it’s ready for a little consolidation. My thesis that gold has peaked is starting to play out and it’s no coincidence that prices started falling right as Treasuries began to move higher. Gold has gotten really overcrowded as the safe haven trade and the fact that we’re seeing targets of $4000 and $5000 on it suggests that the hype has gotten overdone. If the current de-escalation has some legs, I think there’s a good chance we see gold slowly drift lower. I don’t think we’ll see it necessarily fall off a cliff here, but I think the downside potential is there.