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Geopolitical tensions add some flavor to the markets, but they’re still not enough to bring them crashing down. Overall, the “risk-on” sentiment persists, almost defiantly, against all odds.
Investors, seemingly under a spell, keep looking optimistically towards the future, turning a blind eye to the risks. Even digital assets, which took a hit over the weekend, are bouncing back.
It appears that not even the looming specter of a third world war can break the bullish trend. However, that’s just scratching the surface. Investor jitters are on the rise, and with it, volatility.
One can clearly see it in the gold rush to record highs, another surge in the strength of the dollar as depicted by the US dollar index chart, and the yields on US Treasury bonds.
What will be the tipping point for widespread panic, if there is one at all?
Given that we’re still riding the bull market, the signs point more towards a likely correction. And truth be told, such a correction might even do some good. But let’s not forget, the market’s irrational, and there’s still plenty of liquidity sloshing around.
And then there’s the fact that it’s an election year in the US. It’s entirely plausible that the actions of some “big players” will be driven more by political agendas than economic rationale.
Trying to predict when panic will strike is a futile exercise.
A lot hinges on the circumstances. While there’s no shortage of potential disasters on the horizon, as long as they remain hypothetical, the upward trend could very well continue.
At this juncture, investors are probably best off doing nothing. Specifically, it’s wise not to let emotions dictate and refrain from reacting hastily to initial shifts. This approach can help sidestep errors.
However, if fear creeps in and a turnaround seems imminent, it might be prudent to set stop losses and, whenever feasible, keep an eye on support and resistance.
