The weekender: vol on standby, missiles in motion, and wall street’s ww3 weekend watch begins

Markets wrapped the week balancing on a geopolitical tightrope, trading a cocktail of recession signals, rate cut hopes, and energy anxieties—all while Washington spun its usual chaos carousel. The S&P 500 barely budged, closing down 0.2%, but that surface calm masked the underlying grinding volatility. This wasn’t consolidation—it was indecision wrapped in exhaustion.

The economic data finally buckled. After weeks of resilience, the hard stuff cracked. Leading indicators turned down again, with the Conference Board’s LEI flashing red for a second straight month. Think of it as the economy’s version of the check engine light—subtle at first, but now blinking aggressively. New orders slumped, jobless claims rose, and housing permits plummeted. Even the consumer, long the reluctant hero of this cycle, is losing steam.

On the geopolitical front, Middle East risk took a back seat as traders leaned on Trump’s two-week pause window—a voluntary timeout before the next roll of the escalation dice. Oil markets, however, didn’t get the memo. Crude notched its third straight weekly gain, with WTI and Brent up nearly 30% off their May lows, torching the oversupply narrative. When energy’s hot, inflation expectations simmer, and central banks start sweating.

Speaking of sweating—the Fed. Waller went full dove this week, teasing a July cut like he was auditioning for CNBC. Barkin, by contrast, played hawk cop, cautioning against cutting too soon while inflation still lingers above target. Traders shrugged and bought bonds anyway. Front-end yields tumbled, the curve steepened modestly, and rate cut odds ticked higher. Even Powell’s dot-plot discipline couldn’t keep the market from pricing in an easing pivot.

And the dollar? The greenback finally shed its bearish baggage. DXY posted its best week in four months, fueled by a cocktail of safe-haven flows, option-market flips, and short-covering panic. Risk reversals turned positive for the first time since March—traders are betting the buck has more to say. Gold, predictably, took a hit, and crypto wasn't spared either. Bitcoin bled back below its 50-day moving average, clocking a $ 102,000 handle as bulls hit the exits.

Equities muddled through. MegaCaps sagged under the weight of semiconductor angst after reports that Washington might impose sanctions on allies' chip plants in China. AI names did their part to keep the tape alive, offsetting the tech wreck elsewhere. Small caps quietly outperformed—possibly on domestic safety rotation, or just because they had less to lose.

Volatility, meanwhile, stayed curiously contained. The “TACO trade”—Trump’s pattern of tariff threats followed by walk-backs—is muting geopolitical risk premiums. VIX drifted lower despite WW3-lite headlines, and short-dated vol sellers came back to play. But make no mistake: this isn’t complacency. It’s more like traders betting the house doesn't burn down today.

As for sectors, health care, telecom, and materials led the slide, while financials and tech provided just enough ballast to keep the index from cracking. But with macro cracks deepening, oil simmering, and geopolitics stuck in binary mode, the path forward feels more like threading a needle while riding a rollercoaster.

Recession signals? Flashing. Oil? Ripping. The Fed? Divided. The dollar? Roaring. Markets? Caught in the crossfire.

This isn’t trading, it’s managing tail risk chaos. And unfortunately, we are on weekend war-watch again.

Triple Witching Trip

And despite all the headline pyrotechnics surrounding a $6.5 trillion triple witching—yes, one of the largest in June's history—this is not 1987, with humans fumbling order tickets and screaming across pits. This is 2025, where the vast majority of this flow is machine-executed, pre-hedged, and volatility-sanitized by algos months in advance.

Triple witching still has gravity—index options, stock options, and futures all expiring at once can create temporary dislocations, gamma squeezes, or liquidity vacuums—but the idea that it triggers "panic" in execution desks is more myth than market truth. Most of these trades are already embedded into systematic roll strategies or dealer hedging algorithms that adjust in microseconds.

The real impact isn’t about emotional positioning—it’s about mechanical flow distortion, and it usually shows up in subtle ways: intraday whipsaws, skew shifts, or a post-OPEX hangover as positioning clears. If anything, it’s the rebalancing that comes after the witching that holds the real signal, especially when coupled with stretched trades like the AI pair or tight realized vol vs VIX setups.

So yes, size matters. But it’s not about fear. It’s about flow, and the machines are still in the driver's seat.

Crude Oil Outlook: Strait Talk, Risk Premiums, and the $100 Mirage

Oil's recent rally is a textbook example of how geopolitics can inject fear faster than fundamentals can keep pace. Just weeks ago, WTI appeared poised to tumble into the $50s as OPEC+ accelerated the unwinding of voluntary cuts and Trump’s tariff barrage clouded global demand. Now? The market’s bracing for a potential $100+ oil spike—not because of supply-demand tightness, but because of what could happen if Iran and Israel tip into full-scale war and the Strait of Hormuz becomes the battlefield.

The Strait is no small matter—20 million barrels per day, or one-fifth of global supply, flows through that narrow choke point. Yes, Saudi Arabia and the UAE have pipelines to bypass it, but with only 2.6 mb/d of spare reroute capacity, it’s like a garden hose trying to cover a fire hydrant’s job.

Still, a full-blown Iranian blockade? Unlikely. Not because Tehran lacks the capability, but because it would be economic self-sabotage. Iran moves nearly 1.7 million barrels per day (mb/d) of crude and condensates through the Strait, plus another 800,000 barrels per day (kb/d) in refined products. Cutting that off would blow a hole in Iran’s already fragile fiscal revenues. And with China—Iran’s top crude customer—reliant on global price stability more than Tehran’s exports, the geopolitical cost would be steep. Beijing doesn’t care if Iran can’t sell a few extra barrels—it cares if prices explode and fuel costs derail its economy.

There’s also the Trump factor. The U.S. may not import much Gulf oil (~0.5 mb/d), but a spike to $120 or higher would pose a domestic political headache, especially during an election cycle. Trump has made it clear he wants lower energy costs. If Iran crosses the line, expect B-2 diplomacy and a limited military response that surgically disables Iran’s ability to sustain a prolonged disruption.

The more plausible tail risk is targeted damage to Iran’s oil infrastructure. Kharg Island, which handles 90% of exports, is a sitting duck if conflict escalates. However, even if that happens, OPEC+ is sitting on 5.2 million barrels per day of spare capacity. A temporary outage could be papered over—brief price spikes, sure, but sustained triple digits? Unlikely.

Bottom line: The Strait risk is real, but it’s more about headline risk premium than hard barrels coming offline. As long as war rhetoric remains elevated, oil prices will remain bid, with a $70–$80 range as the default setting. But unless bombs start falling on key export terminals or tankers go up in flames, the $100 narrative is more of a speculative ghost than a base case.

Monetary Mosaic: A World Divided, Yet Unified by Uncertainty

If you’re looking for clarity in global monetary policy, good luck—central banks are singing in different keys from the same uncertain hymnal. From Tokyo to Zurich, policymakers are navigating a fog of inflation data, geopolitical landmines, and increasingly erratic trade policy, all while trying to pretend there’s a map for this terrain. Spoiler: there isn’t.

Let’s start with the Bank of Japan, which is still toeing the shallow end of the tightening pool. Rates were held at “around 0.5%,” but they’re slowing bond purchases with the caution of someone backing away from a sleeping bear. Inflation? Still hot. May’s core CPI hit 3.7%, a 28-month high. That has September rate hike odds climbing, especially with the MoF reshuffling supply toward the short end. Japan’s message? They’ll hike if they must—but only if the data forces their hand.

Over in London, the Bank of England is starting to blink. The 6-3 vote to hold was a clear dovish pivot from May’s 7-2. Wage growth is expected to decelerate, labour market slack is finally visible, and inflation pressure may be cooling beneath the surface. The BoE is prepping for a cut, just not yet. “Gradual and cautious” is the new mantra, but the odds are rising that August, not November, is when the real easing begins. Energy prices—and that Middle East wild card—remain a significant caveat.

Then there’s the Norges Bank, breaking its long silence with a 25 bp cut to 4.25%—its first since the pandemic. Inflation has eased significantly since March, and the bank is finally acknowledging this reality. More cuts are expected through 2025, but officials remain cautious. Governor Bache didn’t mince words: “Uncertainty is greater than normal.” Translation: don’t mistake this cut for a trendline—yet.

Meanwhile, Sweden’s Riksbank also trimmed by 25 bps to 2.0%, citing economic softness and a cooler inflation outlook. Another cut is on the table, but the tone was far from celebratory. And in Switzerland, the SNB is back at zero, slashing by 25 bps to confront deflation and a surging franc. With May CPI dipping into negative territory, and the CHF at record highs (while under U.S. Treasury surveillance), the SNB is in a monetary box. Please don’t rule out a return to negative rates, but it would be politically and diplomatically fraught.

Big picture? Central banks aren’t on the same page—but they’re reading from the same book: the global economy is fragile, and policy must remain flexible. The only common theme is caution. Rate paths are diverging because inflation trajectories and currency pressures are diverging. But one thing remains universal: uncertainty is not only alive—it’s in charge.

The market takeaway? Don’t anchor too heavily to any one central bank’s path. This is not a synchronized cycle. It’s a patchwork quilt stitched together by real-time data, political pressure, and market psychology. Anyone waiting for a clean-cut “pivot” narrative might have to wait until 2026.

TIC Data Doesn’t Scream ‘Sell America’—But the Silence Is Loud Enough

April’s TIC data dropped, and while the financial press might’ve geared up for a “foreigners dump U.S. assets” headline, the reality was far more nuanced—and arguably more concerning. There was no fire sale. But there was something just as dangerous: apathy.

Foreign net selling of U.S. long-term securities came in at around $90 billion, barely a ripple in a $30 trillion ocean. And the stock side of that ledger was soft at best—selling yes, but modest, especially compared to March’s almost $900 billion valuation-driven plunge. In fact, some of that March drop wasn’t even real selling—it was just the books getting marked down.

But here’s the kicker: the modest April selling wasn’t some panic exit—it was a strategic drift. A slow recalibration of global exposure to the U.S., as institutional allocators quietly rethink their allocations amid a backdrop of tariff whiplash, trade sabre-rattling, and what’s increasingly looking like weaponized economic policy.

That same drift showed up in Treasuries, too. Yes, foreign holdings dropped, and yes, it was net selling, not just valuation markdowns. Private investors, not official institutions, drove the sales flows. And the standout? A record liquidation from Canada—conveniently timed with Trump’s latest bark about folding the north into a 51st star on the flag. Political jest or not, capital flows listen to the tone, not just the policy.

What matters most isn’t the size of the outflow—it’s the lack of inflow. The U.S. is running the most significant twin deficit on the planet: a current account and fiscal deficit. That means it must import capital daily to keep the lights on. When buyers grow indifferent, yields must rise to lure them back. That’s the real risk—not a fire sale, but a buyer’s strike.

So no, April wasn’t a “Sell America” moment. But it was a quiet test of the global mood. Foreigners didn’t bolt—but they also didn’t buy the rip. In this environment, inaction is a message. And it’s saying: the world is watching, but not necessarily buying.

Chart of the Week

Is the Dollar’s Decline Overdone? Goldman Thinks So

The U.S. dollar has taken a hit this year, no doubt. But according to Gurpreet Garewal at Goldman Sachs Asset Management, the bear case may be running on fumes. While global investors have indeed started to explore greener pastures and the narrative of an “overvalued dollar” has taken hold, the broader case for a dramatic dollar unwind is overstated.

Goldman’s stance is grounded in realism, not rose-coloured theories of de-dollarization. Yes, concerns over U.S. policy volatility, particularly in the wake of Trump’s tariff announcements and the growing twin deficits, have prompted some rotation out of U.S. assets. And yes, capital has chased relative improvement stories in Europe and emerging markets. But stepping back, the foundational supports for the dollar remain largely intact.

Liquidity? Untouched. Reserve status? Unchallenged. And while interest rate differentials have narrowed, real U.S. yields remain competitive, especially when compared to Europe or Japan, where growth is fragile and central banks are either easing or paralyzed by uncertainty.

The recent divergence—U.S. equities bouncing back while the dollar lags—has raised eyebrows. But historically, that’s not unusual. FX often lags equity risk-on turnarounds, especially in politically charged backdrops. Garewal points out that the perception of U.S. overvaluation is obscuring the fact that much of the dollar selling has been sentiment-driven, rather than structurally justified.

Moreover, sentiment may now be overbaked. Positioning looks skewed toward dollar shorts, and options markets have quietly started to price in a dollar floor. If risk sentiment sours, or if inflation forces the Fed to stay higher for longer, those shorts could unwind in a hurry.

Bottom line from Goldman: the dollar’s bruised, not broken. Policy uncertainty may weigh on it tactically, but calling for a structural collapse ignores the mechanics of global capital flow and the realities of reserve currency dominance. Fade the hysteria—not the dollar.

Running Update

After a travel-heavy stretch that threw my June training plan off track, it felt great to get back into rhythm this week, finally. Sure, the break tanked my endurance metrics to year-to-date lows—but honestly, the reset was worth it.

I managed to get in three solid Zone 2 long runs, but with a twist: I was pushing the upper edge of Zone 2, hovering right around LT1 (first lactate threshold)—that sweet spot where you're working, but still efficient. Of course, I crossed the line at times, but what stood out was how quickly my heart rate would return to normal with only slight adjustments in pace. That kind of feedback was encouraging.

It felt like a strong week overall, but unfortunately, I'm hitting the road again this weekend. And if you know anything about post-long-run legs and four hours of traffic on Rama 2 to Hua Hin, you know it’s not a combo I’m eager to repeat. This weekend’s long run is being skipped—but I’ll be back pounding the pavement in Bangkok on Monday, refreshed and refocused.