Markets might expect a bit of a breather after the last few weeks of upheaval amid a new “geo-economic” era. But it’s a very busy calendar and President Trump’s nomination for the new Fed Chair last Friday brought with it fresh bouts of volatility, with a rebound in the beleaguered dollar and historic, wild price action in gold and silver. Crucially, the oversold greenback held on to long-term lows and support, so it will be looking to Friday’s monthly US employment report to reinforce last week’s positive Fed comments about ‘signs of stabilisation’ in the labour market and bounce some more.
That could mean increased volatility in precious metals after violent selling late last week, where both gold and silver gave back huge monthly January gains. We have been writing in the Daily reports about the debt-fuelled, retail-heavy, FOMO driven flows which are always prone to a correction. Indeed, we wrote in the prior December market recap that silver’s history especially, is punctuated by periods of parabolic explosion and collapse. Certainly, a one-day move is not a trend, but it would be wise to be aware of the potential knock-on effects of this volatility, especially if stocks and the Nasdaq suffer more downside. The long equities, long metals and short USD trade has been very crowded and more ‘unwind’ days could accelerate index drawdowns. That said, the long-term drivers for gold and silver are still compelling.
Amid a packed week of S&P 500 company results which includes Disney, AMD and Eli Lilly, we get two more of the Mag 7 reporting earnings, with Alphabet and Amazon releasing after the US closing bells on Wednesday and Thursday. Market reactions to this season’s numbers have been skewed so far, with names priced for perfection like some AI leaders getting punished on any hint of slowing, while solid beats with credible AI monetisation –Meta, parts of Big Tech – are still being rewarded. Alphabet expectations are high, given it was the only Mag 7 stock apart from Nvidia to outperform the broader S&P 500 index last year and hit a $4 trillion market cap in mid-January. Capex, cloud numbers and AI investment will be the focus for GOOG, with AWS growth key for Amazon.