market outlook

Market Summary and Key Outlook (as of May 5, 2025)

Josh

— 1 min read

Global Financial Condition Highlights

  • The risk-on sentiment persists, driven by optimism over trade negotiations, especially with India and potentially South Korea and Japan, supporting equities and risk assets.
  • US economic data remains weak short-term, but markets are forward-looking, anticipating trade deal progress to lift macro outlook by mid-year.
  • Inflation in Switzerland has softened significantly, implying potential rate cuts and CHF weakening.
  • Geopolitical developments, such as US-China trade talks and potential easing of tariffs, are reinforcing risk-on dynamics.

Currencies & Forex Markets

  • USD: Bullish outlook in the near-term due to safe-haven flows and expectations of trade progress; longer-term, some overvaluation risk remains, but markets price in trade optimism.
  • EURUSD: Bearish, as US trade optimism and dollar strength weigh on the euro.
  • USDCHF: Bullish, with Swiss inflation falling to 0% YoY, prompting Swiss rate cuts and CHF depreciation.
  • USDCAD: Slightly bullish, as US dollar appreciation is favored; however, CAD could strengthen if oil prices stabilize.
  • AUDUSD: Cautiously mixed, with risk-on sentiment supporting higher equities but vulnerable to US dollar strength.

Major Asset & Equity Outlooks

  • Equities (S&P 500, Nasdaq): Bullish, benefiting from trade progress, resilient US data, and risk appetite.
  • Gold: Bearish in the very short term if US economic data remains weak and trade optimism prevails; longer-term, structural bullish trend driven by de-dollarization and geopolitical risks.
  • Oil: Slight downward bias, with potential lower prices ahead if recession risks intensify; OPEC’s spare capacity limits upside.
  • Precious Metals (Gold): Long-term bullish, supported by structural trends and fear of recession.
  • Copper: Long-term bullish due to defense spending, energy de-risking, and dollar diversification, despite near-term softness.
  • Natural Gas: Short-term overdone decline; expected to recover as demand fundamentals improve in the US.

Summary

Market sentiment remains risk-on, driven by trade deal hopes and declining US recession fears. The US dollar is expected to stay relatively strong in the short term, with safe-haven flows supporting the currency. Commodities like gold and copper are long-term bullish, aligned with structural macro trends, while oil remains cautious given potential recession signals. Equities should continue to benefit from trade progress and risk appetite, though geopolitical and macro risks remain critical to monitor.

Overall: Bullish risk sentiment supports equities and risk assets, with a cautious view on gold and commodities long-term amid macro uncertainties.

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