Recent events—including victorious declarations from Washington about agreements on customs tariffs with Japan and the EU—continue to support demand for risk assets. At least for now, investors are not concerned about the lack of agreements with China and India.

Why are market participants feeling optimistic?

This is an important question that requires further elaboration.

Over the past six months, since taking office as the 47th President of the United States, Donald Trump has effectively launched a trade war with nearly the entire world. His concept of restoring America's greatness—or more precisely, its faded global hegemony—is not based on radically transforming the domestic economy or creating new factories and enterprises in the real sector. Instead, it relies on the crude coercion of weaker trade partners to pay rent to the U.S. as a suzerain—or, simply put, to be plundered through customs tariffs and forced investments into the U.S. economy. Recent developments clearly show the President's real objective: restoring America's position at the expense of other countries. I addressed this topic in more detail in a previous article, which I encourage you to read.

But why, then, have the markets calmed down? Why are they unbothered by the potential future impoverishment of Europe and other countries and regions that have entered into economically damaging agreements?

For investors, short-term economic issues are indeed relevant—they act as a prism through which they assess the growth prospects of various assets. However, even more important is the predictability of potential developments. Investors don't particularly care what happens to Europe, Canada, Vietnam, or Japan. What matters to them are stable rules of the game within which they can operate. This is why the achievement of agreements between the EU and other countries has reduced tensions and boosted demand for corporate stocks. Although frictions between tariff-imposing America and its partners like the EU and Japan are expected to continue, clarity remains the dominant principle in market decision-making.

Therefore, markets are unlikely to react strongly to the outcome of the upcoming Federal Reserve meeting, which is widely expected to result in no changes to interest rates. The key focus will be on Fed Chair Jerome Powell's responses during the press conference. If he hints that Trump's progress on tariffs could stabilize the U.S. economy, then the central bank may consider resuming interest rate cuts, which had paused last year. Against the backdrop of Trump's victories, such news would stimulate further growth in stock indexes.

On this same wave, the U.S. dollar could continue strengthening against a basket of major currencies—not because anything has radically improved for the dollar itself, but because its counterpart currencies are likely to face widespread challenges due to the plundering of their national economies through tariffs.

What can we expect in the markets today?

I believe the general upward trend in the equity markets will continue, regardless of whether Powell signals the imminent start of rate cuts. The market still has plenty of momentum stemming from Trump's wins. In addition, further positivity could come from the Q2 GDP report, which is expected to show a 2.5% growth compared to a 0.5% decline in the previous period. The ADP private sector employment report could also support market sentiment and the dollar and, of course, the core PCE price index, which is forecasted to drop quarterly from 3.5% to 2.4%.

Overall market outlook:

I believe that the positive sentiment will likely persist through the end of the current week.

Daily Forecast

#CL (WTI Crude Oil)

WTI oil prices are near the upper boundary of the 64.85–69.50 range, where they have remained since late June. A potential announcement of new U.S. sanctions against Russia and its trading partners could push prices up to 71.40. A potential buy level is 69.53.

Gold

Spot gold is consolidating after breaking downward from a bullish flag continuation pattern. This may lead to further decline toward 3283.20. A potential sell level is 3317.90.