Bessett raises concerns about Europe’s regulations and China’s struggling economy, advises against panic
by VT Markets
/
Jul 30, 2025
Treasury Secretary Bessent has returned from his talks with China in Stockholm. He shared his thoughts on the complicated rules in Europe.
Bessent pointed out that China’s economic model is starting to fail. He recommended staying calm, even if no agreements are made by August 1.
Federal Reserve Rate Expectations
He also mentioned that he does not expect the Federal Reserve to announce any rate cuts today. Bessent’s comments aim to reassure the markets during this uncertain time.
Europe appears to be experiencing slow growth, mainly due to its complicated regulations. Recent data shows that German industrial production dropped by another 0.5% last quarter, supporting this idea. Therefore, it might be wise to buy put options on the Euro Stoxx 50 index to prepare for more underperformance.
The situation in China indicates serious long-term risks and a weakened economic system. Youth unemployment has hit a record 25%, and another major property developer missed its bond payment last week. Even though we shouldn’t expect a deal by August 1, this underlying weakness suggests that buying protection on emerging market ETFs is a smart choice.
Preparing For Market Volatility
This mix of long-term risks and short-term calm from officials suggests we should brace for significant market fluctuations ahead. We might see sharp, unpredictable price changes in stocks tied to China and commodities like copper. This situation reminds us of the trade war period in 2019, when volatility options were effective.
Since the Federal Reserve is not likely to cut interest rates today, we expect the U.S. dollar to stay strong. The latest core inflation number of 3.1% gives the Fed a reason to keep its policy strict. This “higher for longer” approach indicates that traders should consider derivatives that bet on sustained high short-term interest rates.
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by VT Markets
Jul 30, 2025
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