Kansas City Fed President Jeffrey Schmid emphasized that the ongoing uncertainty stems from the tariff debate. This unpredictability continues to influence economic conditions and could impact various markets. When dealing with market information, it’s essential to be cautious due to possible risks and uncertainties. No recommendations for buying or selling assets should be drawn from this data. Thorough research is strongly advised before making any decisions.

Error-Free Information Guarantee

There’s no assurance that the information provided is free from errors or timely. Investing in open markets carries significant risks, including the potential total loss of your investment, which can have financial and emotional effects. The views expressed in this content are those of the authors and may not represent any official policy or position. The author has no relationships with any companies mentioned and was not compensated for this article. Since personalized recommendations aren’t available, readers should evaluate the accuracy and completeness of the information themselves. We disclaim legal liability for any errors or losses arising from the use of this information, which should not be considered investment advice. Schmid’s comments remind us that changes in discussions about broad policies, like tariffs, can affect markets in unpredictable ways. His perspective highlights the sensitivity of the current environment to external factors, especially trade discussions that come with government unpredictability.

Volatility And Market Positioning

We believe that recent unresolved policy discussions contribute to ongoing market volatility. While this doesn’t guarantee sudden spikes in volatility every day, when it moves, it often does so quickly. We’ve seen how small policy announcements can lead to sudden shifts in implied volatility and expectations in options markets. For those involved in futures and options, it’s important to position themselves in a responsive manner rather than a reactive one. Assuming that tariff tensions will either escalate or fade quickly may not be realistic. Instead, the current situation suggests a need to remain flexible—keeping directional exposure light unless it’s hedged—and to focus on shifts in tone over specific outcomes. Markets are showing a tendency to make sharp adjustments based on minimal actual progress, indicating that sentiment often drives movements. The potential for varying hawkish or dovish statements from policymakers could intensify short-term fluctuations without signaling long-term changes. We see this tension between sentiment and data unfolding every day. Effective positioning will depend more on adaptive strategies rather than rigid views. For instance, skew levels in index options indicate that many investors are opting for hedges instead of strong directional bets, reflecting a lack of conviction in any single direction. One practical insight is that lasting trades may carry more risk than reward until there’s more clarity. Instead, strategies like weekly rotations or short-dated spreads might be more effective for managing exposure, especially when they align with known event risks. Even strategically used flat calendars can benefit when external rhetoric creates volatility. That said, now isn’t the time to chase small price movements thinking they’re the start of something significant. Recent intraday reversals indicate participation, but the overall conviction is weak. Traders seem quick to exit positions at the first sign of trouble, a pattern that rarely supports a trending market. With this in mind, consider revising your risk models to emphasize flexibility. Avoid committing to trades based on broad assumptions about direction or timeline. The better approach right now is to follow market movements closely and focus on trades that profit when others need to adjust quickly. No setup is risk-free, but being short gamma in this environment—especially around news events—can lead to unnecessary losses. Being long optionality at reasonable prices can provide protection and opportunity. In times of rising uncertainty, these dual roles have become exceptionally valuable. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now