For all that the uncertainty around Washington's global tariff war and worrisome U.S. fiscal outlook continue to unnerve investors, not to mention the Trump-Musk public mud-slinging circus, world markets just closed out a quietly impressive week.
Broad U.S., Asian, European and emerging market equity benchmarks all rose, pushing the MSCI World index to a fresh record high, while the dollar, Treasury yields and gold generally held steady over the week.
Of course, these broad sweeps mask some notable price moves in certain assets, such as Tesla's 14% share price crash on Thursday, Treasury yields spiking up to 15 basis points on Friday after the latest nonfarm payrolls data , or the dollar sliding to within touching distance of a new three-year low on Thursday.
Investors appear to be in a forgiving mood, willing to trust that policymakers will dial down global trade tensions, slow the U.S. fiscal train as it approaches the cliff edge, and steer the world economy through these choppy waters with minimum damage.
Investors faced several key monetary policy crosswinds this week. The Bank of Canada stood pat and the European Central Bank cut rates by a quarter of a percentage point, but their guidance was seen as relatively hawkish. The Canadian dollar and euro both strengthened.
On the other hand Switzerland's slide into deflation ups the ante on the Swiss National Bank and traders are betting on a return to negative interest rates by the end of the year. Meanwhile, the Reserve Bank of India on Friday cut rates by more than expected.
Fed officials mostly continue to hold the line that uncertainty around tariffs and their impact on growth and inflation is so high that the central bank is firmly in the 'wait and see' camp. If the Fed is to resume its easing cycle, it won't be until October, according to rates futures market pricing.
With global central banks perhaps entering a summer pause, focus will intensify on the Trump administration's trade deal negotiations with major trading partners like China and Europe ahead of July 9, when Washington's pause on reciprocal tariffs expires.
Trump indicated that his 90-minute telephone call with China's Xi Jinping on Thursday was friendly, and there were lots of smiles in his meeting later that day in the Oval Office with German Chancellor Friedrich Merz.
But ultimately, the call with Xi yielded nothing concrete, although U.S.-China talks will take place in London next week. And it is through the 27-nation European Union that any deal with Germany will be reached, not bilaterally.
There are so many moving parts on Washington's tariff board, including but not restricted to: sector tariffs, reciprocal tariffs, bilateral negotiations with dozens of countries, and court rulings and counter rulings.
It's a little surprising, perhaps, that investors' glass is half full.
