UBS advises investors to expect short-term market ups and downs while sticking to long-term investment strategies. They recommend diversifying across various asset classes, using capital preservation methods, and buying during market dips for future gains.

Focus on Economic Fundamentals, Not Headlines

We believe that market movements depend more on economic fundamentals than on the latest news. Corporate earnings remain strong, with S&P 500 earnings expected to grow by about 11% year-over-year in the second quarter of 2025. This echoes the period from 2018 to 2019 when the market learned to focus on real growth over fears from trade tensions. The Federal Reserve is likely to support the markets by cutting interest rates soon. Currently, there’s a nearly 90% chance of a 25-basis-point cut at the September FOMC meeting. This prediction is reinforced by solid consumer spending, with July 2025 retail sales up by a healthy 0.6%. We foresee ongoing short-term volatility, which presents clear opportunities for traders. The VIX index is around 18, indicating market uncertainty, making options premiums appealing for sellers. In these conditions, selling cash-secured puts on strong companies or major indices during market dips could be a wise move. This strategy allows you to earn income from the premium while establishing an entry point for a long-term investment. With the 10-2 year Treasury yield spread remaining positive at about 25 basis points, the risk of a significant recession that could disrupt this strategy seems low.

Defensive Strategies For Risk Protection

For those wanting to safeguard their gains, the current market offers some effective defensive strategies. Buying protective puts on a major index like the SPX can serve as insurance against sudden market drops. A collar strategy, which involves purchasing a put and selling a call on a stock you own, can also offer protection at a lower cost. Create your live VT Markets account and start trading now.

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Japan’s chief tariff negotiator, Akazawa, recently met with US officials for talks but didn’t achieve much progress. He spent three hours discussing issues with US Commerce Secretary Lutnick and had a 30-minute meeting with Treasury Secretary Bessent. The talks aimed to strengthen the benefits for both Japan and the US under their existing agreements. Japan pushed the US to confirm its position on reciprocal tariffs and proposed changes to the relevant executive order.

Ongoing Communication Between Japan And The US

Both sides emphasized the need for continued communication. However, the discussions did not yield significant advancements in trade tariff issues, leaving future negotiations uncertain. These latest trade talks have not resulted in any meaningful outcomes, maintaining a sense of uncertainty. This lack of a clear path suggests that the current influences on markets, especially the USD/JPY currency pair, will likely continue. Traders should not expect major shifts after this non-event. For those trading currencies, the USD/JPY pair is essential to monitor. This week, it has been around the 158 mark, largely due to the differing policies of the US Federal Reserve and the Bank of Japan. Trading options for volatility seems wise, as one headline could disrupt the current stability. This ongoing stalemate presents challenges for Japanese stocks, particularly for large exporters concerned about trade friction. The Nikkei Volatility Index is elevated at around 18.5, above its annual average, indicating investor anxiety. Now may be a good time to review protective put positions on the Nikkei 225 index to guard against potential losses.

Growing Trade Imbalance With The United States

Looking at the bigger picture, these discussions take place against a backdrop of a widening trade imbalance. In the first half of 2025, Japan’s trade surplus with the US reached nearly $75 billion, catching political attention in Washington. Similar circumstances in the late 2010s led to unexpected tariff announcements, reminding us history can repeat itself. In summary, the main takeaway from these talks is to remain cautious and avoid making large new bets. The emphasis on “continued close communication” suggests a stalemate, so our current strategies should remain in place. The market is waiting for a real trigger, and this wasn’t it. Create your live VT Markets account and start trading now.

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Rabobank believes the Bank of Canada may cut its rate by 25 basis points soon, perhaps in October. However, this is uncertain since the central bank kept its rate at 2.75% in July. Rabobank predicts that the current interest rate gap between the US and Canada, which is 175 basis points, will shrink to about 75 basis points by 2026. This change is due to the Federal Reserve expected to cut rates more quickly. By then, the Bank of Canada should have a final rate of 2.50%.

Impact On USD/CAD Currency Pair

The smaller rate gap will likely affect the USD/CAD currency pair. Rabobank forecasts this pair will mainly stay in the 1.34 to 1.36 range, a zone where prices have fluctuated significantly in 2023 and 2024. We expect the interest rate difference between the US and Canada to decrease in the next year. The Bank of Canada might make one last cut in October, while the Federal Reserve is likely to start its own rate cuts later. This situation should keep the USD/CAD exchange rate relatively stable. On August 7, 2025, Canada’s inflation rate for July was 2.6%, which is slightly lower than expected. This supports the idea that the Bank of Canada can still reduce rates. Meanwhile, the US jobs report showed unemployment rising to 4.1%, reinforcing the prediction for future Federal Reserve rate cuts.

Derivative Trading Strategies

For traders in derivatives, selling volatility could be a smart strategy in the coming weeks. With the USD/CAD expected to stay between 1.34 and 1.36, options strategies like iron condors or selling strangles may work well. The three-month implied volatility for USD/CAD has already dropped to 6.5%, indicating a forecast of lower price fluctuations. The market is showing a pattern similar to what occurred in 2023 and 2024, when the 1.34-1.36 range strongly attracted prices. As USD/CAD is currently near 1.3580, traders might think about using bear call spreads to take advantage of resistance at the upper end of this range. Any moves above 1.36 are likely to be temporary unless the interest rate outlook changes significantly. Create your live VT Markets account and start trading now.

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The United States has started charging tariffs on imports of one-kilogram gold bars, as reported by the Financial Times. In a letter dated July 31, U.S. Customs and Border Protection announced that these gold bars will now be classified under a customs code that includes tariffs. This change could have significant effects on Switzerland, which is the top global hub for gold refining. The decision may disrupt the movement and processing of gold in this essential market.

Impact On Gold Market Prices

The U.S. has reclassified one-kilogram gold bars under a customs code that imposes tariffs. This news has already caused gold futures to rise this week, with prices nearing $2,510 an ounce as the market reacts to potential supply restrictions. This suggests an initial shift is happening, but we may see larger price movements ahead. The best immediate strategy is to prepare for increased volatility. The CBOE Gold Volatility Index (GVZ) has jumped from a low of 16 to over 21 in early August, indicating that options markets expect bigger price fluctuations. We should consider buying options, like straddles, to benefit from anticipated market turbulence without committing to a specific direction just yet. This situation directly affects Switzerland, which plays a major role in gold refining. In 2024, Switzerland exported over $60 billion worth of gold to the U.S., making this tariff a major disruption for a key supply chain. We can learn from past events, like the U.S. abandoning the gold standard in 1971, which led to long-term price instability and rising trends.

Strategies For Trading The Tariff Fallout

In the coming weeks, an important trading focus will be the price difference between U.S. and international gold. The new tariff is likely to make U.S. gold more expensive than gold in London. To take advantage of this anticipated premium, we should consider spread trades, such as buying COMEX gold futures while selling London spot gold. We should also pay attention to the currency markets. Gold refining is vital for the Swiss economy, and a major disruption to its primary customer could weaken the Swiss Franc. Taking a bearish position on the CHF, perhaps using USD/CHF call options, could be another way to trade the effects of this policy change. Create your live VT Markets account and start trading now.

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On August 7, 2025, major US stock indices ended mixed, with the NASDAQ showing slight gains. President Trump nominated Stephen Miran to temporarily take Kugler’s position on the Federal Reserve Board. US consumer credit in June rose to $7.37 billion, exceeding the expected $7.00 billion. Meanwhile, crude oil futures settled at $63.88. The US Treasury sold $25 billion in 30-year bonds at a top yield of 4.813%. In geopolitical news, Israel’s Netanyahu announced plans to take control of Gaza. The US dollar closed lower or mixed against major currencies, with notable declines against the GBP and NZD. The Bank of England’s Governor mentioned that economic conditions were balanced, impacting the GBP/USD exchange rate. The BOE reduced the bank rate by 25 basis points to 4.00%. US wholesale sales edged up by 0.3%, while initial jobless claims climbed to 226,000, reflecting potential weaknesses in the labor market. Labor costs for Q2 increased by 1.6%, while labor productivity rose by 2.4%.

Fed’s Cautious Optimism

Atlanta Fed President Bostic shared cautious optimism, highlighting strong US economic fundamentals but also predicting slowdowns. He expressed concerns about declining pandemic savings and tariffs that could raise prices. A rate cut from the Fed seems likely, depending on future data. Most major European indices closed higher, except for the UK’s FTSE 100, which reacted to the BOE’s rate cut. In the US stock market, the Dow fell by 0.51%, while the NASDAQ increased by 0.35%. US yields rose, with the two-year yield climbing to 3.723%. Bitcoin jumped by $2,456.02, reaching $117,487 after President Trump signed an executive order permitting 401(k) investments in bitcoin and other alternative assets. With a somewhat weakening labor market and the Federal Reserve’s hawkish signals, we expect increased volatility in the weeks ahead. The differing approaches of a rate-cutting Bank of England and a cautious Fed create uncertainty, making long volatility positions on options for major indices like the S&P 500 appealing. Historically, the VIX index, which measures volatility, has spiked during times of Fed policy confusion, such as in 2022 when it averaged over 21.

Federal Reserve’s Interest Rate Stance

We expect the Federal Reserve to keep interest rates higher for an extended period. The nomination of Stephen Miran, potential promotion of Christopher Waller to Fed Chair, and Raphael Bostic’s focus on inflation from tariffs indicate a hesitation to cut rates soon. This is further supported by weak demand in the latest 30-year bond auction, suggesting that traders might want to consider derivatives that benefit from steady or rising yields, similar to the market adjustments seen for rate cuts in 2024. In the foreign exchange market, the British pound’s rise against the dollar, despite a rate cut, suggests the Bank of England is unlikely to aggressively ease in the future. The close 5-4 vote reveals deep divisions, meaning further cuts are uncertain and will heavily rely on incoming data. This indicates that betting on a clear trend for the GBP/USD exchange rate could be risky; therefore, range-trading strategies or options benefiting from significant price movements in either direction may be wiser. The contrasting performance in the stock market, with the tech-heavy NASDAQ rising while the Dow Jones Industrial Average dipped, indicates a sector rotation. The executive order allowing 401(k) investments in bitcoin is boosting technology and crypto-related assets. We see potential in pair trades, such as going long on NASDAQ 100 futures while shorting Dow Jones futures to take advantage of this divergence. Bitcoin’s stunning rise to over $117,000 is a direct result of new demand from retirement accounts. This situation echoes the price surge following the approval of spot Bitcoin ETFs in early 2024, suggesting this momentum could continue. At the same time, crude oil’s drop to around $63 raises worries about a global economic slowdown, making bearish positions on oil futures a viable hedge against the broader economic uncertainties flagged by Fed officials. Create your live VT Markets account and start trading now.

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The White House has announced that former President Trump will make an economic announcement soon, but we don’t have any details yet. In other news, Stephen Miran has been chosen to temporarily take Kugler’s place on the Federal Reserve Board. While this appointment has been decided, it isn’t permanent at the moment.

Economic Announcement and Market Uncertainty

The upcoming announcement from the White House is creating a lot of uncertainty in the market. This follows the nomination of Stephen Miran to the Federal Reserve Board, which is still pending approval. Traders should brace for increased volatility in the coming weeks. Market anxiety is evident in options pricing. The VIX, which measures expected volatility, has risen to 18.5 in early August 2025, compared to a July average of 15. July’s inflation report showed a higher-than-expected 3.6% CPI, leaving the market anxious about future fiscal and monetary policies. Miran’s nomination hints at a more dovish approach from the Fed, potentially leading to lower interest rates. This creates a conflict for traders, as possible rate cuts might be counteracted by new trade or tariff policies from the White House. This back-and-forth between the Fed and the White House will likely shape market movements. Historically, we saw a similar trend after the 2024 election. The market experienced a brief rally due to hopes of deregulation, followed by a sell-off early in 2025 when tariff threats against Asian imports returned. This pattern suggests any policy announcement could lead to sharp swings in market activity.

Strategies for Navigating Market Volatility

In light of this, buying volatility is a smart approach. We should consider purchasing September straddles or strangles on the SPY and QQQ. This strategy can profit from significant price movements in either direction, without needing to predict the announcement’s outcome. We should also keep an eye on sectors that are particularly sensitive to policy changes. Options on industrial ETFs like XLI or energy ETFs like XLE could experience notable price fluctuations. Any talk of tariffs may stir up volatility in retail and manufacturing stocks. The uncertainty surrounding Miran’s confirmation offers another trading opportunity. Options on Treasury bond ETFs like TLT could be a good way to speculate on future interest rates. If the confirmation goes through successfully, we might see a bond rally as the market prepares for a more dovish Fed. Create your live VT Markets account and start trading now.

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The major US stock indices lost their early gains today. The NASDAQ closed higher, reaching a new record, while the S&P and Dow fell. Here’s how they finished: – **Dow Industrial Average**: Down 224.48 points (0.51%), closing at 43,968.64. – **S&P Index**: Down 5.06 points (0.08%), closing at 6,340.00. – **NASDAQ Index**: Up 73.27 points (0.35%), closing at 21,242.70. – **Russell 2000**: Down 6.56 points (0.30%), closing at 2,214.71.

Intraday Indices Performance

At their peak during the session, the indices showed gains: – **Dow**: Up 305.31 points. – **S&P**: Up 44.65 points. – **NASDAQ**: Up 238.73 points. – **Russell 2000**: Up 21.87 points. This market behavior indicates a significant divide, creating chances for traders. The NASDAQ hit a new high, while the Dow and Russell 2000 slipped. This suggests that money is flowing into a few large tech companies instead of spreading across the economy. This shift seems linked to July 2025 inflation data, which was slightly higher than expected at 3.4%. This rise has sparked fears that the Federal Reserve might take longer to reduce interest rates—typically a bigger concern for industrial sectors and smaller firms than for dominant tech companies. The market’s turn from its highs indicates that investors are growing anxious about this outcome. The substantial intraday drop, where early gains vanished for most stocks, is a worrying sign. Such price movements often indicate underlying weakness and uncertainty among buyers. In response, the CBOE Volatility Index (VIX) rose by over 8% to close at 17.5, showing that the market is anticipating possible sharp changes ahead.

Strategies and Market Outlook

Given this scenario, we’re exploring strategies that capitalize on the growing gap between tech and the broader market. One approach could be buying call options on the NASDAQ 100 while buying put options on the Russell 2000. This strategy could profit if large-cap tech continues to do well while smaller companies struggle. With rising volatility, buying options is becoming more appealing than selling them. Purchasing puts on the S&P 500 could be a simple way to hedge against potential market declines in the upcoming weeks. The cost of this protection is increasing, suggesting that others are also bracing for a pullback. This market trend resembles parts of 2023, where a few large-cap stocks drove most of the index gains. Historically, this narrow leadership has often preceded times of greater volatility and market corrections. As a result, we are adopting a more cautious approach than a few weeks ago. Create your live VT Markets account and start trading now.

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On Friday, Japan will publish the Bank of Japan’s “Summary of Opinions” from the July meeting. The Bank kept its short-term interest rate at 0.5%, which was expected. This summary will explain the reasons for this decision and show the Bank’s potential plans for raising rates in the future. During the meeting, Governor Ueda discussed various issues, including the recent decline of the Japanese Yen. He made it clear that future policy choices will not only focus on inflation forecasts. The Summary of Opinions will reflect the Policy Board’s perspectives on domestic and global economic situations, looking at growth, inflation, and job trends.

Evaluating Current Monetary Policies

The document will also assess how effective the current monetary policies are, which include interest rates, asset purchases, and yield control. It will highlight potential risks to the economy and discuss future policy options. Any differing opinions may also be included. In a few weeks, the complete Minutes of the meeting will be released. While the Summary gives a current overview, the Minutes will provide a detailed account of the discussions and decisions made. The Summary uses simpler language, while the Minutes require a deeper understanding of economics. Both documents are essential for grasping the Bank of Japan’s policy direction. Tomorrow, we will get the Bank of Japan’s “Summary of Opinions” from July. Governor Ueda’s recent comments were mixed; he downplayed inflation but mentioned upward risks. This uncertainty has us looking for signs of a hawkish stance among board members. Recent data appears to support a more hawkish approach, which the market hasn’t fully anticipated. The national Core CPI for July was reported at 2.6%, staying well above the Bank’s 2% target for over a year. This ongoing inflation puts pressure on the BOJ to consider raising rates sooner than expected.

Opportunities in Yen-Related Derivatives

We see a chance in yen-related derivatives, as the risks seem tilted towards yen strength. Buying call options on the JPY or selling call options on the USD/JPY pair could be strategies to position for a possible reversal. These trades would benefit if the BOJ indicates a more aggressive policy, leading to a stronger yen. This viewpoint is supported by strong wage growth, which the BOJ closely monitors for sustained inflation. The final results from the 2025 spring “shunto” wage negotiations revealed an average wage increase of 4.1%, a multi-decade high. This suggests that inflation is becoming more entrenched, making it harder for the Governor to dismiss its importance. For almost two years, following the currency crisis of late 2023, the yen has been weak, with USD/JPY now trading around 152.50. Historically, shorting the yen was a popular trade due to significant monetary easing. Now, signals suggest that this trend may be coming to an end, and a major correction could be approaching. With mixed signals from leadership, implied volatility on yen options is likely to rise before the next policy meeting. Buying straddles or strangles on USD/JPY allows traders to profit from significant price shifts in either direction. This approach allows trading on uncertainty without committing to a specific hawkish or dovish outcome. In the weeks ahead, we will closely monitor the full Minutes from the July meeting for more details. While the Summary tomorrow will set the immediate tone, the Minutes will offer a fuller picture. We need to be prepared to adjust our positions based on new insights and any differing opinions that may arise. Create your live VT Markets account and start trading now.

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The White House will soon announce President Trump’s pick of Stephen Miran as a temporary Federal Reserve Board member. He will take over Adriana Kugler’s position until January 31, 2026. Currently, Miran is the Chair of the Council of Economic Advisers, a role he has held since March 2025 after Senate confirmation. Miran earned a Ph.D. in Economics from Harvard University and a B.A. from Boston University. His work experience includes positions as a senior strategist, senior fellow, and senior advisor at the U.S. Treasury. He played a key role during the pandemic, helping with emergency financial support, and received an award for his efforts.

Miran’s Research Interests

Miran’s research looks at household savings, tariffs, and global monetary trends. He believes the U.S. dollar is overvalued and supports using tariffs to improve trade balances. He also promotes deregulation to reduce business costs and combat inflation by increasing supply. In terms of trade policy, Miran supports protective measures to fix trade imbalances. He has called for more accountability within the Federal Reserve and raised concerns about its independence. Miran also states that tariffs have only a minor effect on inflation, arguing that any price changes would be short-term. Miran’s nomination brings a significant change to monetary policy. His short-term role until January 2026 raises the possibility of altering traditional Fed approaches. We must consider a board member who views deregulation and trade policies as key strategies against inflation. Miran’s claim that tariffs won’t lead to lasting inflation contradicts much market belief, which could create tension. With the core CPI data from July 2025 showing inflation at 3.1%, his views will be immediately challenged. This points to the need for careful observation of derivatives that protect against inflation, as the market may bet against his theory and expect higher prices.

Monetary Policy Implications

Miran’s appointment might increase interest rate volatility. The MOVE Index, a measure of Treasury market volatility, has risen to 115 this past month, reflecting uncertainty about future Fed actions. Options on Treasury futures could gain value as traders prepare for a wider range of outcomes in upcoming FOMC meetings. The U.S. dollar faces a complicated outlook that requires careful navigation. While tariffs are usually positive for the dollar, Miran has voiced concerns about its overvaluation. This contradiction makes currency options, which can profit from significant movements, appealing for currency pairs like EUR/USD. We need to closely monitor Fed communications for signs of internal disagreements. Miran’s praise for Governor Waller hints at a possible alliance, but his unique views may clash with more traditional board members. As a result, the predictability of Fed statements could diminish, making options that expire around FOMC meeting dates especially useful for trading expected volatility. Create your live VT Markets account and start trading now.

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In June 2025, US consumer credit increased by $7.37 billion, which is higher than the expected $7.00 billion. The previous month’s number was adjusted to show an increase of $5.13 billion, revised up from $5.10 billion. Total outstanding consumer credit rose from $5,047.3 billion to $5,054.7 billion, an increase of $7.4 billion or 0.15%. However, revolving credit decreased from $1,298.1 billion to $1,297.0 billion, a drop of $1.1 billion or 0.08%.

Nonrevolving Credit Increase

On the other hand, nonrevolving credit grew from $3,749.2 billion to $3,757.6 billion, rising by $8.4 billion or 0.22%. This highlights changes in consumer credit habits, showing a clear distinction between revolving and nonrevolving credit. While the June consumer credit report may seem positive at first glance, the details reveal a more concerning situation. The decline in revolving credit by $1.1 billion, marking the first decrease in six months, is a significant red flag. It suggests that consumers are reducing their credit card spending and becoming more cautious with their finances. This trend aligns with recent retail sales data from July 2025, which showed a surprising 0.2% drop in spending at general merchandise stores. A similar pattern occurred in late 2022 when consumers tightened their budgets in response to high inflation. The increase in nonrevolving credit is primarily due to auto and student loans, which do not fully reflect the overall economic health.

Investment Opportunities Arising

In the coming weeks, this situation presents a chance to purchase puts on consumer discretionary ETFs. The market hasn’t fully accounted for a slowdown in this sector, and implied volatility is reasonable. We should aim for contracts expiring in September and October to take advantage of any potential earnings warnings. This consumer weakness also changes the outlook for Federal Reserve policy. The likelihood of another rate hike in 2025 has dropped significantly, and now the market is starting to expect a higher chance of a rate cut by the second quarter of 2026. This makes it sensible to position in interest rate futures for a more dovish Fed. Overall uncertainty is likely to rise, making broad market hedges a smart strategy. The CBOE Volatility Index (VIX) has been trading close to its 52-week lows, around 13.5. Buying VIX calls or inexpensive, out-of-the-money puts on the S&P 500 can offer affordable protection against a market beginning to react to this consumer slowdown. Create your live VT Markets account and start trading now.

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