Early Asia wrap: TSMC ignites the tape, Asia follows the silicon signal

Asia is trading with a silicone-induced bounce in its step, riding on the coattails of another record run from the S&P 500 and Nasdaq. Taiwan’s TSMC led the charge like a stallion out of the gate, up nearly 3% and on track for a record close, after delivering a bullish forecast that fed the AI euphoria machine even more protein powder. The chip giant’s outlook essentially whispered, “We're not just building semiconductors, we’re building the future.”

That tech tailwind fanned out across the region. The MSCI Asia Pacific Index rose 0.6%, with decent participation in Hong Kong and mainland China. Japan, however, played the role of cautious spectator—local traders opting to stay flat-footed ahead of a key weekend election, wary of any political banana peels.

Beneath the surface of this risk-on mood, the macro backdrop was mutating. Fed Governor Waller floated the idea of a preemptive rate cut—an eyebrow-raising nod that maybe, just maybe, the Fed doesn't need inflation to roll over before it starts cutting. That sent the dollar into a brief wobble and gave risk assets one more excuse to strut. Yet, as anyone who's traded long enough knows, when the Fed starts talking nice, it usually means they're seeing ghosts in the data we haven’t spotted yet.

Quant models are humming with excitement. UBS suggests CTAs could pile in with another $60–70 billion in equity exposure over the next fortnight, buying in all but the most apocalyptic scenarios. Essentially, unless the S&P 500 nose-dives below 6,000, the algos will keep dancing.

Retail, too, has gotten back into the groove. After missing the April–June moonshot, mom-and-pop ETF flows are back with enough gusto to help break overhead resistance. Since then, they’ve stayed consistent, propping up the rally like retail's got a second wind—or a revenge arc.

But don’t mistake this for euphoria. Positioning still feels tentative. According to CFTC data, hedge funds are holding a shrug when it comes to stocks, and large asset managers are still underweight. In other words, the big boys haven’t bought in yet. And that makes the market oddly stable—because the FOMU (Fear of Missing Up) hasn’t fully kicked in.

Market memory is short, but some at 9 West 57th haven’t forgotten the dot-com collapse. Apollo’s latest note warns the current AI frenzy makes the ‘90s look like amateur hour. But unlike in ‘99, this time it’s not Pets.com leading the charge—it’s trillion-dollar titans with real cash flow and data centers burning more power than some countries. So while the bubble narrative is seductive, this one comes with stronger fundamentals. Just… don’t say that too loud near the exits.

UBS rolled out a "tariff fear gauge" that’s currently reading a big fat zero. Markets are brushing off the Trump tariff saber-rattling like it's background noise from a reality show rerun. But apathy can be dangerous. If tariff risk flares back up, the repricing could be sudden and sharp—especially with protection costs scraping the floor.

Speaking of hedging: QQQ, XLK, and XLC puts expiring in August are pricing at a cool ~1%, with 35 delta protection. That’s cheap armor with the market at all-time highs. Stocks are flying at all-time highs. Protection costs? Dirt cheap. It’s the kind of setup that screams complacency deluxe. What could possibly go wrong? Only everything—if the music stops.

The greenback, once left for dead, is staging a revenge arc worthy of a summer blockbuster. After breaking above its 21-day moving average earlier this month, the DXY is now flirting with the 50-day. A firm close above 99 could send the dollar into squeeze overdrive, with dollar shorts at risk of getting steamrolled.

Emerging markets are finally seeing love again—foreign investors have plowed in over $30 billion since April. That could signal a risk-on appetite that’s broadening beyond just U.S. tech.

And for those wondering why silver is perking up—it’s not just about precious metals as an inflation hedge. It’s about hardware. AI needs chips, chips need machines, and machines need silver. Lots of it. This isn’t your grandfather’s silver play—it’s the plumbing for the AI revolution.

Asia’s riding the global rally wave, AI fever refuses to break, and even the Fed is making soothing noises. But underneath all the sunshine is a market running hot, with volatility on sale and positioning still cautious. If everyone’s dancing, but nobody’s drunk yet—do you join the party or start eyeing the exits?

Stay nimble.