US futures are trading lower as North America prepares for market hours, with tech stocks leading the declines. S&P 500 futures fell by 0.5%, and Nasdaq futures dropped by 0.7%. This decline follows trade uncertainties and recent events. Last Friday, a US court decided to temporarily reinstate Trump’s tariffs, and he threatened to double steel and aluminum tariffs to 50%. This has affected market sentiment. Additionally, the ongoing lack of progress in talks with China poses a risk; any loss of patience could jeopardize the current “truce” and reignite the trade conflict. As we enter a new month, the market feels slightly subdued. Traders are focusing on trade news, especially any announcements from Trump that might influence market direction. While major equity futures are under pressure, the focus is sharpening on policy messaging and potential fallout from existing trade measures. The recent reactivation of tariffs and a firmer stance from the White House have created a wary atmosphere. With the S&P 500 down by 0.5% and the Nasdaq sliding further, we see a clear risk-off sentiment. Markets are not just reacting to what has been said but also what has not been addressed. Trump’s warning about raising tariffs to 50% shows a willingness to escalate tensions unless a concrete resolution with China emerges. So far, that hasn’t happened. The current situation indicates we’re not closer to a lasting agreement, and there are low expectations for short-term breakthroughs. This fosters an environment filled with uncertainty. A muted start to the month isn’t unusual, but the focus on trade indicates that traders are reacting more to news than to fundamentals. With headlines potentially breaking at any moment, the risks extend beyond equities to derivative positions linked to volatility and momentum. Those with short-term strategies should be aware of selling trends, particularly in interest-sensitive sectors like tech. What Powell and the Federal Reserve do next may not hold much weight for now, especially without clarity on trade. Presently, volatility on both sides of the market is influenced by cautious policy decisions, external risks, and a lack of substantial new economic data to alleviate those pressures. Some players in the options market are already reacting to these pressures. Yields remain stable, but adjustments in weekly contracts suggest traders are preparing for downside protection. This reflects a broader sentiment of unease rather than fear, largely due to unpredictable trade diplomacy. Moving forward, we’ll monitor three key areas: quick policy updates from Trump, market reactions to Chinese equity ADRs, and shifts in corporate bond volatility. By observing these factors, we can gain insights into broader market positioning and adjust short-term strategies effectively. For now, we avoid making assumptions. Instead, we focus on being flexible and patient, maintaining strategies that work across various scenarios. The aim is to adopt a protective stance without being overly aggressive, which may involve lower leverage, tighter pricing, and a reduced willingness to take risks. In summary, the market is not stagnant—it’s cautious.

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