US-China trade détente, Trumps GCC Visit: A Week of Recovery Amid Uncertainty

US-Saudi relations deepened this week, with a historic economic agreement that included a $142 billion arms deal and a total of $600 billion in broader investments. These agreements were accompanied by further diplomatic engagements, including Trump’s meeting with Syrian President Ahmed al-Sharaa — the first such encounter in 25 years.

This historic meeting signals a potential shift in US-Syrian relations, with the US announcing intentions to lift longstanding sanctions on Syria following the fall of Bashar Assad’s regime. However, the announcement has been met with scepticism from analysts, who caution that the geopolitical landscape in the Middle East remains highly unstable.

Meanwhile, Qatar inked a $96 billion deal with Boeing, marking the largest aircraft order in the company's history. The UAE secured over $200 billion in deals, including a $1.4 trillion AI pact aimed at deepening cooperation in artificial intelligence and energy sectors. The significance of these agreements extends beyond immediate economic impact. They also reflect a strategic effort by GCC countries to position themselves as leaders in emerging technologies, particularly in AI and clean energy.

These regional moves underscore the growing influence of the GCC in global markets and its strategic positioning as a hub for AI and advanced technology investments.

On the fixed income side, bond yields climbed sharply, with the 10-year Treasury yield jumping to 4.5%, reversing from 4% in early April. This surge in yields indicates a reassessment of recession risks, as investors adjust their expectations on what the Federal Reserve might do.

However, rising yields also pose risks to existing bondholders, as higher interest rates can erode the market value of older bonds with lower coupon rates.

Despite the initial bounce, the US dollar weakened, as market participants reassessed the potential for prolonged trade disruptions. Currency markets were not immune to the volatility. While the dollar weakened, the euro and yuan remained stable, reflecting cautious optimism around the US-China trade détente.

The 90-day tariff reduction period provided some relief, but analysts caution that further escalation could reignite volatility, particularly in emerging market currencies.

Despite the positive developments, cautionary notes remain. While the S&P 500 managed to close the week up 2.6%, recapturing its year-to-date losses, some strategists warn that the rebound may be overdone, especially given the continued risks surrounding US-China trade relations. We will watch this unfold as the weeks go on!

The Nasdaq Composite surged from recent lows, driven by a tech rally that saw gains in Nvidia, Palantir, and Super Micro. However, this rally has been fuelled by short covering, as institutional investors who had been positioned defensively were forced to unwind their negative bets amid the sudden rebound.

Goldman Sachs revised its earnings and S&P 500 targets upward, citing reduced economic drag from tariffs and better growth prospects. However, concerns remain regarding the sustainability of the rally, as many institutional investors were defensively positioned, leading to a painful short squeeze in trend-following hedge funds and macro trades.

At Hoxton Wealth, we are carefully monitoring these dynamics, ensuring our portfolios remain diversified across asset classes and geographies. Our investment strategy continues to focus on high-quality fixed income and equity exposure. Whilst Omer has been making changes to the HCM Moderate and Adventurous funds to ensure that we remain diversified our passive holdings have remained unchanged as we believe that long term investing and remaining invested is the best course of action.

As we move forward, we remain vigilant in navigating ongoing market volatility. Our approach continues to remain the same as we have discussed in the above.

With interest rate policy in flux, we are actively assessing potential shifts in Federal Reserve strategy, as any move toward a rate cut could significantly alter the landscape for both equity and fixed income markets in hopefully a positive manner.

Additionally, we are monitoring developments in the AI and technology sectors, as well of course as the evolving tariff dynamics with China and the rest of the world.

As always, if you have questions or need reassurance during these turbulent times, please reach out to your advisor or contact our client services team directly at client.services@hoxtonwealth.com. We are here to guide you through the ups and downs, with a steady hand and a long-term perspective.