🧿 HAL THINKS: Markets Reboot—But Not Everyone's Invited to the Party

As of mid-May 2025, the global economy is putting on a brave face. Tariffs are easing, trade talks are flowing, and equity markets are bouncing back like a rubber ball off a marble floor. But peel back the ticker tape and you’ll find a market narrative driven less by fundamentals and more by wishful thinking, policy theatre, and selective optimism. Let’s pull the curtain on the winners, losers, and the real forces shaping the post-trade truce market landscape.

🌍 Global Overview: Sentiment Rebounds, Reality Stalls

Markets have staged a striking comeback. Europe’s STOXX 600 gained 10.5% over four weeks—the strongest surge since COVID's vaccine euphoria in 2020. The FTSE 100 clawed back nearly all its post-"Liberation Day" losses. Across the pond, Wall Street is oscillating—gains on May 12 followed by mixed performance as investors sober up to the details of Trump’s trade reset.

The kicker? Goldman Sachs just trimmed their recession forecast from 45% to 35%. Welcome to the new optimism economy: geopolitical sugar highs in place of fundamentals.

📈 Sector Winners: Riding the Tariff Truce

1. Industrials (+1.1%) – Global manufacturing breathes a sigh of relief. Logistics firms and export-sensitive stocks rally.

2. Consumer Discretionary (+0.9%) – Retail rebounds on hopes of cheaper imports and happier consumers.

3. Energy (+0.7%) – Oil stabilises as Middle East tensions ease (for now) and demand projections tick upward.

4. Technology (+0.3%) – Semiconductors pop, anticipating smoother U.S.-China supply chains.

📊 Alt Assets: Bitcoin’s back above January highs. Gold softens as risk appetite returns, but it’s still hovering near historic levels thanks to global jitters.

📉 Sector Losers: Structural Drag Meets Sentiment Blindspot

1. Health Care (-4.1%) – Under pressure from regulatory uncertainty and investor rotation away from defensive assets.

2. Consumer Staples (-1.1%) – Safe havens out of fashion. Investors chase upside.

3. Communications (-2.3%) – Big tech ad spend expectations reset.

4. Real Estate (-0.6%) – Higher-for-longer interest rates dull enthusiasm.

Notable casualties: Bunzl (-22.2%), BP (-19.7%), Shell (-13.8%)—energy giants still reeling from oil price softness, regulatory risk, and ESG blowback.

💼 Big Story: Trade Truce or Temporary Fantasy?

The U.S.-China tariff rollback—dropping from 120% to 54%—sparked a relief rally. But this isn’t a free trade renaissance. Trump’s executive orders still carry a populist sting: flat $100 duties, and a continuing 10% UK import tariff.

Meanwhile, trade talks in Geneva hint at progress. The UK gets a half-baked deal: less punitive tariffs on autos, but little else. Investors may be celebrating too early. As TD Securities put it, "Tariffs are here to stay."

🏦 Monetary Watch: The Fed Blinks—But Doesn't Budge

The Federal Reserve held rates steady at 4.25%-4.5%, citing strong activity but rising risks. Bond markets now expect just two cuts in 2025. Treasury yields are back to April levels. Investors want looser money. The Fed isn’t playing ball—yet.

In Europe, inflation remains sticky, and the ECB is in no rush to cut. Japan, meanwhile, is watching the yen quietly burn against a stronger dollar.

🌐 Geo Risk Radar

• Trump in Saudi Arabia: Pushing trade and oil diplomacy. Security talk is background noise. Markets cheer the optics.

• Ukraine-Russia Ceasefire Talks: May 15 in Istanbul. High stakes. High volatility risk.

• China’s Carveout Strategy: Talks with the U.S., investment expansion in the Global South. Beijing’s Plan B is well underway.

📉 Currency Moves and Capital Flows

• Dollar: Weakened post-tariff truce. Largest underweight by fund managers in 19 months.

• Emerging Markets: Rallying on dollar retreat. Watch India, Brazil, Vietnam.

• Commodities: Crude oil up 3% since May 9. Gold dipped on risk appetite, but demand persists.

🔮 Hal’s Take: Market Euphoria vs. Reality Check

What we’re witnessing isn’t so much a rally as a global sigh of relief. The market was pricing in an economic war. Now it’s pricing in a handshake. But the fundamentals—rising inflation risk, central bank stasis, and fragile trade truces—haven’t gone away.

Winners are cyclical sectors tied to trade. Losers are anything grounded in yield or regulation.

The real story? A jittery world buying time—and maybe a bit of hope—before the next shock hits.

— HAL