Week ahead: Record highs, fragile lies — Welcome to July’s risk rodeo

Wall Street’s fireworks show came a bit early this year, with the S&P and Nasdaq blowing through record highs like a bottle rocket strapped to a jetpack. But with geopolitical jitters momentarily sedated and the “bad data = good news” crowd back in charge, traders now turn their eyes to the next minefield: U.S. payrolls, fiscal horse-trading, and the Fed’s ever-wobbly independence.

This week, the spotlight swings back to Washington. Trump’s racing the clock to slap his “Big Beautiful” tax-and-spend package together by July 4th. That’s not policy—it’s pyrotechnics. Think of it as a legislative Roman candle: loud, messy, and likely to burn through a lot of cash before it fizzles. Markets are sniffing out just how much sugar gets poured into this fiscal Kool-Aid and what that does to the deficit balloon

Then there’s Thursday’s non-farm payrolls—a high-stakes coin toss dressed as economic data. With job growth expected to slow again, the labour market may finally be limping enough to give the Fed an excuse to cut without losing face. But here’s the rub: if wage growth doesn’t roll over and unemployment creeps up, we’re back in that murky zone where bad data starts to feel... just bad. It’s a tightrope walk between soft landings and soft demand.

Meanwhile, the dollar continues to spiral like it’s got vertigo, down over 10% year-to-date and looking less like a global reserve currency and more like a used scratch card. That’s lit a fire under everything from European defense stocks to gold, which is now dancing near 25% gains on the year. Even Chinese tech—yes, Chinese tech—is quietly outperforming the once-mighty Magnificent 7, who look like they’ve spent the first half of 2025 catching their breath.

And let’s not forget the July 9 tariff cliff. Trump’s tariff ceasefire is set to expire, and while the market’s pretending not to care, this is the kind of thing that can knock 50 points off the S&P before breakfast if mishandled. With Powell already warning about tariff-induced inflation, you’ve got to wonder if the Fed’s next move will be a rate cut or a rearguard action to defend their own independence.

Oh, and just for fun, central bankers are all off to Portugal this week, sipping vinho verde in Sintra and pretending they’ve got a handle on global disinflation, fractured supply chains, and the return of Cold War-style defence spending. Good luck with that.

Add to the mix China’s economic reboot that still hasn’t left the garage, and you’ve got a second half of 2025 shaping up to be anything but boring. The PMIs out of Beijing will likely be as flat as last month’s noodles, tariffs are still hanging over export sentiment like smog over Shanghai, and the uneasy U.S.-China trade truce is barely holding up under the weight of mutual mistrust.

This rally’s been running on liquidity pipe dreams. With every macro print and fiscal headline acting like a speed bump or a slingshot, expect a volatile July. The second half of 2025 is open for business—and it’s already trading like a Friday afternoon options expiry.

Sintra Seance: Whispering Policy in a World Screaming for Clarity

The global central banking elite head to Sintra this week, and while the setting may be serene—think rolling hills and polite aperitifs—the mood beneath the surface is anything but. Behind closed doors, the real million-dollar question isn’t about inflation or growth—it’s whether the entire U.S.-centric monetary regime is quietly starting to come apart at the seams.

Call it the Sintra Summit or the “Central Banker Therapy Session”—but Powell, Lagarde, Ueda, Bailey, and Rhee are all stepping into a geopolitical and monetary minefield. Inflation prints may be softening, but the big narrative is growing louder: Trump’s tariff tantrums and fiscal bazookas are shaking confidence in the greenback’s supremacy. The dollar hasn’t had this rough a start to a year since bell-bottoms were in fashion, and rate traders are starting to wonder: is this just noise, or is the monetary plumbing starting to rust?

All eyes will be on Powell—seated dead-center in what amounts to a monetary dunk tank. He’s trying to project calm, independence, and a steady hand, even as Trump circles with a blowtorch and a short list of successors. With his authority freshly underpinned by the Supreme Court, Powell may have room to dig in—but make no mistake, the Fed’s institutional autonomy is now a tradeable risk. Markets will be dissecting every word like a Jackson Hole footnote.

Meanwhile, Lagarde is polishing up the euro’s “moment.” From Draghi’s “whatever it takes” to now “maybe we’ve got a shot,” the euro’s gone from punchline to understudy—still not quite ready for primetime but now seen as the least dysfunctional option. The pitch? That the eurozone is finally looking a bit like a cohesive union… just without the fiscal engine, common defense, or unified capital markets needed to be taken seriously. But hey, optics matter—and with 16% of surveyed central banks planning to add euro exposure, even symbolic progress is drawing flows.

Elsewhere, Asia’s monetary bosses are juggling their own tightropes. Japan’s Ueda is dragging his feet on rate hikes—not because the data says don’t, but because tariffs could slam the door on Japan’s fragile recovery. Korea’s Rhee, meanwhile, is staring down a surging property market just as he tries to end an easing cycle without torching consumer sentiment. And in the UK, the Bank of England is doing its best impression of the Fed circa 2018: split votes, tightrope inflation, and a labor market that won’t quit even as momentum fades.

Across the board, policy cohesion is fraying. The consensus playbook is gone. What remains is a patchwork of local firefighting, global crosscurrents, and political interference. It's a world where monetary pilots are flying blind in a cockpit full of conflicting gauges—tariffs, fiscal blowouts, AI dislocations, and geopolitical hot spots all crowding out the once-dominant inflation narrative.

Sintra may not deliver any fireworks—but behind the smiles and soundbites, expect a room full of central bankers wondering just how long the current system can hold before someone flips the board and rewrites the rules.