Weekly Market Update – Nine Days of Gains: Is Confidence Returning?

S&P 500 (USD)

• Weekly Change: +2.08%

• Year-to-Date: -4.51%

• May 1st Close: 5,601.80

• Longest equity streak of positive returns in 20 years — a milestone that has received surprisingly little mainstream coverage.

Euro Stoxx (EUR)

• Weekly Change: +2.22%

• Year-to-Date: +6.44%

• May 1st Close: 5,160.22

• The primary driver of this week’s gain was optimism around US–China trade talks.

FTSE 100 (GBP)

• Weekly Change: +1.81%

• Year-to-Date: +3.72%

• May 1st Close: 8,500

Adding to market momentum were strong quarterly earnings from major tech players. Amazon, Microsoft, and Meta all reported results that exceeded expectations, highlighting the continued strength of the AI sector. While some concerns remain around cloud segment growth, the broader takeaway was positive.

The ability of these companies to deliver solid earnings — even amid macroeconomic uncertainty — reinforces investor confidence in long-term growth.

“If we’re seeing strong earnings and still getting growth, that’s a powerful reminder of the importance of staying invested.”

While short-term market volatility may persist due to evolving trade policies and political shifts, maintaining a diversified investment portfolio remains a prudent strategy. Historically, those who try to time the market often miss key opportunities.

Time in the market continues to beat timing the market.

A growing concern in Beijing is that the US could use its financial system as a weapon, particularly as relations between the two countries continue to sour. One turning point came after Russia’s dollar assets were frozen following its invasion of Ukraine — a move that alarmed Chinese policymakers. They realized that, in the event of a US–China conflict, their own dollar-based investments could be at risk.

Another factor is political unpredictability in the US. Under Donald Trump, and potentially again if he returns to office, Washington has become more confrontational with China. New tariffs, attacks on US institutions like the Federal Reserve, and talk of extreme financial measures — such as forcing foreign investors into long-term, low-interest bonds — have made China uneasy.

Rather than dumping US Treasuries overnight (which would hurt both countries), China is taking a slow and cautious path. It’s gradually:

• Reducing Treasury holdings: China's official holdings have dropped by more than 27% since 2022.
• Shifting into agency bonds: These are US-backed investments like those from Fannie Mae and Freddie Mac. They’re a bit riskier than Treasuries but offer better returns.
• Buying gold: China has sharply increased its gold reserves — a classic safe-haven asset that isn’t tied to any government.
• Investing outside the US: China is moving more of its money into non-US markets and even rethinking where its reserves are managed — with more now going to Hong Kong or being held in European banks.

While China isn’t going for an all-out financial attack, its slow pivot sends a strong signal: it no longer fully trusts the US financial system.

That shift could have ripple effects around the world:

• Investor nerves: Even the idea of China pulling back from US Treasuries creates uncertainty in global markets.
• Pressure on the US: If more countries follow China's lead, it could make it harder for the US to borrow cheaply.
• Rise of alternatives: Other countries may explore moving away from the US dollar, looking at currencies like the euro, Swiss franc, or gold.

However, China faces limits. Treasuries are still the largest, most liquid investment option. There simply aren’t many other places big enough to absorb China’s $3 trillion in reserves.

What’s happening here is part of a broader trend: the slow decoupling of the world’s two biggest economies. China wants more control over its money, less reliance on the US dollar, and protection against any financial surprises from Washington.

It’s a quiet shift — for now. But if tensions escalate further, the world may see bigger changes in how money moves across borders, and how power is exercised through financial systems.

Tensions between the United States and China aren’t just playing out in trade talks or tech disputes — they’re now influencing where China parks its money.

For decades, China has held huge amounts of US government debt — known as Treasuries — using its massive foreign reserves built up through exports. These Treasuries have traditionally been seen as a safe and stable investment. But in today’s uncertain political climate, Chinese officials are starting to quietly rethink that strategy.