FX Evolution: Is This the Beginning of Something Big…

Markets are starting to show signs of slowing down. Yes, some traders are buying call options aggressively on big-cap stocks like Nvidia (NVDA). However, the overall market momentum has noticeably slowed over the past week.

The likely reason is macroeconomic factors. Inflation remains high, and has now been sticky for several months of data. Investors are starting to pick up on this fact, as indicated by the rising yields on U.S. Treasury bonds once again.

As bond yields move higher, bond prices move lower. Typically, stocks and bonds move opposite each other. But with interest rates still at 15-year highs, a market breather here may make some sense.

The past few months has seen some market rotation. While semiconductors have performed well over the past three months, it’s slowed over the last month.

And over the last month, gold, energy, and defensive stocks have fared better. If that trend continues and we get a bigger market rotation, those stocks should continue to do well.

Meanwhile, in the tech space, investors are still focused on companies that are earning a profit.

More speculative tech names continue to underperform. With interest rates looking to stay higher for longer, they will likely continue to underperform.

In short, the market may look to slow in the coming weeks, and may even face a small pullback. But it may not become a full-blown correction.

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