Complacency

Less than one week ago potential US tariffs, higher market rates than official rates in the US market (mortgages), and weak currencies, in both emerging and developed markets were investor concerns, bordering on fear.

Now, after a few positive data releases, investors seem to be more comfortable with investment exposure to the US, Europe, and emerging markets

Complacency seems to be growing.

Some data releases that seemed to fuel optimism were.

· The S and P Global Composite PMI for Germany was positive, breaking through 50 versus expectations of 48.

· President Trump seemed to back pedal on the level of tariffs on China, and may be delaying tariffs on other countries like Mexico and Canada.

· Talk of pushing oil prices down through coercing OPEC and increased drilling in the US helped the outlook for inflation.

Markets expressed these data points in positive ways.

For the week

· The Euro went up 2% versus the USD.

· The US ten-year treasury was unchanged.

· The US 30-year mortgage rate went below 7%

· The Mexican peso went up 2.6% versus the USD

· The Brazilian real went up 3% versus the USD

· The UK Pound went up 2.5%

Although these releases were good, uncertainties will exist.

· Germany showed economic improvement, and it is a key economy in Europe, but others like France, Italy, and the UK have not yet ticked up.

· Tariffs less of a risk? President Trump has changed his mind on this a lot, and it is hard to accept this as his final policy.

· Lower oil prices pushing inflation down? Yes, that would help inflation, but part of that argument is the US convincing OPEC to raise production, not an easy thing to do.

· Elections in Germany and France are still a risk to the Euro.

· Uncertainty regarding US debt management, the debt ceiling, and budget deficits have not gone away.

· The UK is not out of the economic woods. They still have a budget problem and consumer confidence sunk to the weakest level since 2023.

On a final note, gold. In times of rising uncertainty, gold is an investment haven. When uncertainty goes up, investors often buy gold. When the global investment outlook is good, gold prices are generally weak.

In the last week the gold price has gone up 1%, reaching its highest level since October

While this week may have shown that things are not as bad as they seemed, and things may be getting better, it does not seem to be enough to increase risk in investment portfolios.

Short-term bonds still seem to make sense

Now is not the time to be complacent.

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