Morgan Stanley’s Chief Investment Officer, Mike Wilson, suggests changing the classic 60/40 portfolio to a 60/20/20 split. This new plan includes 20% in equities, 20% in bonds, and 20% in gold, aiming to offer better protection against inflation.

New Strategy to Manage Risks

Wilson believes this strategy addresses the limited growth potential of U.S. stocks compared to Treasuries. It also meets the need for higher long-term bond yields. He views gold as a strong protective asset that works well with high-quality stocks. The traditional 60/40 model depends on stocks and bonds balancing each other, but adding gold brings an extra layer of defense. Wilson favors shorter-term Treasuries, particularly five-year notes, as they provide better rolling returns. Wilson sees both gold and stocks as protective investments: stocks have growth potential, while gold serves as a safe option when real interest rates fall. This view is gaining traction as U.S. stocks bounce back; the S&P 500 and Nasdaq are hitting new highs, despite September often being a weaker month, partially due to Trump’s tariffs announced on April 2. With the S&P 500 and Nasdaq reaching new heights, we should consider strategies that reflect limited upside from here. One option is to use derivatives to sell out-of-the-money call options against our current holdings. This generates income while the market may trade sideways. This strategy is appealing, especially as the VIX, which indicates market volatility, has dropped to 13.5, a low not seen since the last quarter of 2023, making option premiums attractive for sellers.

Gold as a Strong Hedge

We should now view gold as a key hedge, particularly with ongoing inflation concerns. Historically, gold tends to move opposite to real interest rates; when real yields drop by 1%, gold often sees gains in the high single-digit percentages. Therefore, purchasing call options on major gold ETFs can offer leveraged exposure during times of market instability or falling real rates. Favoring shorter-term bonds means we should adjust our positions along the yield curve. One effective approach is using Treasury futures, particularly taking long positions in 5-year note futures rather than 10-year note futures. The gap between the 5-year and 10-year yield has recently narrowed to just 15 basis points, making a curve-steepening trade an attractive way to capture potential changes in rate expectations. This cautious approach is further supported by the calendar, as we are in a historical weak period for stocks. Since 1950, September has been the worst month for the S&P 500, with an average decline of about 1%. This seasonal factor gives us another reason to buy protective puts and strengthen our hedges in gold for the weeks ahead. Create your live VT Markets account and start trading now.

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Westpac Consumer Confidence in New Zealand dropped slightly in Q3 2025, reaching 90.9 compared to 91.2 previously. This indicates a small decline in consumer sentiment. The NZD/USD exchange rate is about 0.5982. Some foreign exchange charts might show exaggerated movements, but the actual value is close to this rate.

Current Exchange Rates Insight

The AUD/USD pair is around 0.6647, despite some charts suggesting it is near 0.6630. It’s essential to rely on accurate data for currency values. ACT: We aim to enhance understanding with clear and accurate information, steering clear of unreliable chart data. The slight drop in New Zealand’s consumer confidence isn’t the main issue for the Kiwi dollar. A reading around 90 has been typical for a while, showing ongoing concerns about the cost of living, as observed in 2024 and 2025. This data reaffirms the existing trend rather than introducing a new one, so any erratic chart movements are likely just minor fluctuations due to low liquidity. We should focus on the overall situation, where fundamentals are providing some support for the NZD. The Reserve Bank of New Zealand is committed to maintaining high interest rates to combat inflation, keeping the cash rate steady at 5.5% since May 2023. Also, looking back at the Global Dairy Trade auction from early September 2025, we noticed whole milk powder prices continuing their slow recovery, which positively impacts New Zealand’s export-driven economy.

Factors Influencing NZD Movement

With the NZD/USD just below the important 0.6000 level, there’s a struggle between weak local sentiment and supportive central bank policies. This implies that the pair might stay within a range in the coming weeks, caught between local pessimism and strong export prices. Traders in derivatives might see this as a chance to prepare for low volatility as the pair seeks a clear direction. The next significant influence on NZD/USD will likely come from the United States rather than New Zealand. Attention is on the upcoming U.S. inflation data, which will significantly affect the Federal Reserve’s next decision. This report will have a much greater impact on currency direction than the small shift in Kiwi consumer confidence. Create your live VT Markets account and start trading now.

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Bank of America’s Global Fund Manager Survey shows that institutional interest in cryptocurrency is very low, with average investments close to zero. More than half of global investors have no dedicated investments in cryptocurrencies, even though the market is growing. In a survey from September, 67% of fund managers reported not investing in digital currencies like Bitcoin, Ether, Ripple, and Tether. This indicates that many institutional investors do not view crypto as part of their regular investment strategies. A few survey participants have ventured into the crypto market. Only 3% reported a 2% allocation in crypto, another 3% hold 4%, and just 1% have more than 8% exposure. Overall, the average investment in cryptocurrency is just 0.4%. Among those who do invest, the average allocation is 3.7%. This is a sharp contrast to the higher percentages typically found in equities, bonds, and cash. The survey reveals that 84% of fund managers have not begun long-term investments in crypto. Only 8% have made structural allocations, suggesting that most view crypto as a short-term opportunity rather than a core investment. Despite growing retail adoption and changing regulations, institutional investors remain cautious due to high volatility and regulatory issues. While crypto markets are trading in the trillions, most professional fund managers are still on the sidelines. These findings indicate that institutional money is largely absent from the market, making it sensitive to shifts in sentiment. This large pool of potential investment means that any reason for institutions to enter, like clearer regulations, could lead to significant market reactions. For derivative traders, this scenario suggests preparing for increased volatility in the future. We are now more than a year and a half past the introduction of spot Bitcoin ETFs in early 2024, which have attracted over $70 billion in assets. However, this amount is very small compared to the trillions managed by these institutions, suggesting they are using these ETFs for short-term exposure rather than a fundamental strategy. This hints that the next big market shift will rely on a broader institutional embrace of crypto. Currently, the gap between potential investment and actual amounts creates a fragile market, which is perfect for strategies that focus on volatility. Implied volatility for options set to expire in early 2026 is already high, indicating that the market expects a significant move before that time. It’s wise to consider strategies like long straddles or strangles to make the most of a potential breakout, regardless of which direction it takes. With 84% of managers yet to start structural allocations, the potential for future investment is enormous. A smart strategy is to buy long-dated call options that expire in mid-to-late 2026. This allows for a bet on the eventual “great allocation” while limiting immediate risk to the premium paid. However, in the weeks ahead, the lack of these large buyers means less structural support to handle bad news. Ongoing uncertainty from U.S. regulators is the main reason fund managers cite for their reluctance. Therefore, using put options to protect existing long positions against sudden market drops is a sensible approach.

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A private survey from the American Petroleum Institute (API) revealed a bigger drop in crude oil reserves than expected. The predicted decline was -0.9 million barrels. For distillates and gasoline, the anticipated changes were +1.0 million barrels and +0.1 million barrels, respectively. The API survey gathers data from oil storage facilities and companies. This report comes out before the official data from the U.S. Energy Information Administration (EIA), which is due on Wednesday morning U.S. time.

EIA Comprehensive Data

The EIA report is more detailed, using information from the Department of Energy and other government agencies. While the API provides general crude storage levels and weekly changes, the EIA report gives specifics, including refinery inputs and outputs, plus storage levels for different types of crude oil. Analysts view the EIA report as more reliable for understanding the oil market, offering insights into light, medium, and heavy crude oil storage levels. The large crude oil draw in the private survey is a positive sign for the market. It indicates that demand is outpacing supply, which could lead to higher oil prices soon. Traders should be on the lookout for a possible price spike in WTI and Brent futures leading up to the official report. A key event this week is the government’s release of the EIA data. If the EIA confirms a significant drop in reserves, it would support the case for a continual price rally, especially as we near the end of the summer driving season. A similar trend occurred in late 2023 when decreasing inventories and OPEC+ cuts led to a strong price increase.

Market Implications and Strategic Options

With WTI crude prices already close to $92 a barrel—its highest in over a year—this inventory update is particularly significant. Recent satellite data indicates a slowdown in exports from major Middle Eastern ports, raising global supply concerns. U.S. commercial crude inventories have dropped by more than 15 million barrels in the last month, so another large decline would confirm a tight market. For derivative traders, this scenario suggests considering short-term call options to benefit from a potential price rise while managing downside risk if the EIA data falls short. A move above the recent high of $93.74, a level last seen in August 2024, is the next technical target. This strategy allows for participation in upward trends while keeping risk manageable. We can also monitor spreads, like the WTI-Brent spread, to assess international market tightness. A widening spread might suggest that U.S. supply issues are becoming clearer compared to the global benchmark. Additionally, with the distillate season approaching, bullish positions on heating oil futures could be appealing if crude inventories keep decreasing. Create your live VT Markets account and start trading now.

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**Retail Sales and GDP Estimates** Retail sales, excluding autos and gas, rose by 0.7%. This is an increase over the previously revised figure of 0.3%. Categories like clothing, sporting goods, and motor vehicle dealers showed strong sales, though some of these gains may be due to higher import costs. These retail sales numbers are likely to help GDP estimates, with the Atlanta Fed’s GDPNow tracker for Q3 increasing to 3.4%. While the upcoming Federal Open Market Committee (FOMC) decision may not change based on this data, it could spark important discussions about possible rate cuts. Industrial production saw a small increase of 0.1% in August, and manufacturing output grew by 0.2%. The NAHB housing market index held steady at 32 for September, indicating stable sales conditions but a decline in buyer traffic. U.S. stocks began the day on a positive note, boosted by Oracle’s potential involvement in a TikTok deal, but closed slightly lower. Major indices, including the Dow and S&P, experienced minor declines, which were also reflected in European shares that had larger drops. **Currency and Bond Market Trends** The U.S. dollar faced challenges as key currency pairs shifted. Treasury yields fell, with the 2-year yield dropping to 3.509%. Today’s retail sales report complicates the Fed’s plans. Consumer spending is showing stronger growth than anticipated, making a rate cut tomorrow more difficult to justify. With core PCE inflation remaining around 2.8% for most of 2025, this strong demand could lead the Fed to take a cautious approach to easing. The bond market is pricing in a dovish Fed, as evidenced by the larger drop in the 2-year yield compared to the 10-year. This suggests that derivative traders should consider strategies that might benefit from a dovish surprise, such as buying SOFR futures or call options on Treasury futures. Additionally, a long straddle on 2-year note futures could be a wise tactic to capture market volatility, whether the Fed maintains its stance or opts for a larger-than-expected 50 basis point cut. Create your live VT Markets account and start trading now.

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Economic Indicators to Watch

On September 17, 2025, New Zealand will release economic data from August. Analysts expect stable performance with no major changes in the economic outlook. Japan will also share important economic figures for the same time period. Experts anticipate that the results will be consistent with previous trends. Australia will announce its latest economic data on the same day. Analysts predict that the data will align closely with past results, showing little variation. While one day’s data may not cause significant changes, the overall picture is crucial for currency and index volatility. Central banks in the region are in a sensitive position, and any unexpected results could alter market expectations for future interest rate decisions. For derivatives traders, this is a good time to prepare for a potential increase in volatility. In New Zealand, the focus is on the second quarter GDP. This data will reveal if aggressive rate hikes by the Reserve Bank of New Zealand have pushed the economy into recession. Following a stagnant first quarter and declining business confidence over the last three months, a negative growth report could fuel expectations for future rate cuts. Traders may look to buy NZD/USD put options to benefit from a possible decline in the Kiwi dollar.

Trade and Employment Data Insights

For Japan, the Merchandise Trade Balance Total is crucial, especially since the Yen is hovering around the 155 level against the dollar, a weakness not seen since early 2020. A larger-than-expected trade deficit would emphasize the burden of high import costs and pressure the Bank of Japan, leading to uncertainty in its policies. This situation makes USD/JPY options straddles attractive, as they profit from significant moves in either direction. Australia’s upcoming employment data is particularly important for the Reserve Bank of Australia’s near-term policy. With the unemployment rate recently increasing to 4.1% as reported in August 2025, a weak jobs report could rule out future rate hikes. Traders are positioning themselves with AUD/USD call options in case of an unexpectedly strong jobs number that might indicate a more aggressive central bank stance. Looking back at uncertain periods for central banks, like late 2023, we noticed that even small data releases could lead to significant market movements during times of complacency. The real opportunity in the upcoming weeks lies not in predicting the direction but in preparing for a breakout from this low-volatility phase. Purchasing options on currency pairs like AUD/JPY or the ASX 200 index could be a cost-effective way to brace for the expected market response. Create your live VT Markets account and start trading now.

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US stock indices dropped slightly after a day filled with ups and downs. The indices opened strong but fell into the negative as investors awaited the FOMC rate decision. Both the S&P and NASDAQ reached record highs during the day, hitting 6626.99 and 22397.50, respectively. The NASDAQ 100 ended its nine-day winning streak with a tiny loss of 0.08%. The NASDAQ composite also dropped a bit after rising in eight of the last nine days.

Key Indices Performance

Here are the final results for major indices: – Dow Industrial Average: -0.27% – S&P Index: -0.13% – NASDAQ Index: -0.07% – Russell 2000: -0.09% Among the 11 sectors of the S&P 500, Energy performed the best, while Utilities struggled the most. Five sectors saw gains, while six faced losses: – Energy: +1.74% – Consumer Discretionary: +0.82% – Consumer Staples: +0.24% – Telecom Services: +0.27% – Health Care: +0.03% – Industrials: -0.27% – Technology: -0.20% – Materials: -0.50% – Financials: -0.57% – Real Estate: -0.68% – Utilities: -1.81% The market seems to be holding back as we await tomorrow’s FOMC decision. The slight pullback from record highs suggests that traders might be taking profits or securing positions. The CME FedWatch Tool shows an 85% chance of a 25 basis point increase, but the main concern is the future guidance for the rest of the year.

Market Tension and Trading Strategies

The current market tension signals an opportunity to trade volatility. The VIX has risen over 15% in the last week, now at around 17.5, reflecting uncertainty after last week’s August CPI report showed a slightly high inflation rate of 3.9%. Considering buying straddles or strangles on indices like the SPX could be a good strategy to prepare for larger-than-expected market moves, no matter the direction. The end of the NASDAQ’s winning streak indicates possible exhaustion. This could lead to a period of consolidation or a small pullback, even if the Fed’s outcome is favorable. Selling out-of-the-money call spreads above the NASDAQ’s new high of 22397.50 may be a smart way to profit from this potential ceiling. Sector performance highlights concerns about inflation and interest rate expectations. Energy’s strength is linked to WTI crude prices staying above $95 a barrel due to OPEC+ production cuts announced earlier this month. The weakness in utilities and real estate shows that the market is preparing for prolonged higher rates, a scenario last seen during the aggressive rate hikes of 2023. Create your live VT Markets account and start trading now.

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When the Federal Reserve meets, many wonder, “How will the market react?” The market often makes quick moves after these announcements. However, a more important question is how these market changes relate to your investment plan. For long-term investors who hold quality stocks for five years or longer, short-term fluctuations from the Federal Open Market Committee (FOMC) don’t really matter. These investors stick to their strategy, regardless of market ups and downs. On the other hand, short-term traders need to prepare for potential market shifts instead of trying to predict them.

Risk Management Strategies

The key focus should be on managing risk and dealing with unexpected market changes. For example, if you have a stock that has doubled in value, selling 15% of it can lock in profits while still allowing for future growth. Traders should think about their strategies, the risks they face, and actions that will be valuable no matter what the market does. Major events, like FOMC meetings, can cause market volatility but are not guaranteed chances for profit. Successful market players plan for worst-case scenarios and protect their current positions before chasing new opportunities. The essential question isn’t what happens next, but why you’re interested and how best to proceed. Instead of trying to predict the outcome of the FOMC meeting tomorrow, we should focus on positioning ourselves for any market movements. The situation is uncertain. According to the CME FedWatch Tool, there is about a 60% chance of the Fed pausing changes and a 40% chance they will raise rates. We need a plan that prepares for both possibilities. Implied volatility is high, with the VIX around 19, indicating that options are pricier at the moment. We’ve seen this happen before, especially during the Fed’s aggressive rate hikes in 2022 and 2023, when uncertainty builds up before announcements. Often, after the Fed speaks, this uncertainty fades rapidly in what we call a “volatility crush,” which can hurt those who bought options at high prices.

Post Meeting Strategy

This suggests considering strategies that profit from a decline in volatility, such as selling iron condors or credit spreads on major indices. For those wanting to take a directional bet, using debit spreads can help define risk. This way, an unexpected market move doesn’t completely harm your position, and a volatility crush impacts you less negatively. Once we know the outcome of tomorrow’s meeting, we should quickly turn our attention to the next data points. The recent August CPI report, which showed a higher-than-expected inflation rate of 3.6%, reminds us that the fight against inflation is still ongoing. The market’s response to upcoming employment and inflation data in the following weeks will influence the next FOMC meeting in November. Create your live VT Markets account and start trading now.

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European Commissioner Ursula von der Leyen and President Trump discussed ways to increase economic pressure on Russia. They suggested speeding up the phase-out of Russian fossil fuel imports as part of new measures. President Trump also mentioned that Ukrainian President Zelenskyy might need to start negotiations to end the ongoing conflict. This comment hinted at possible talks between the leaders.

Phase Out of Russian Fossil Fuels

The renewed focus on phasing out Russian fossil fuels could help support energy prices. With winter approaching, traders should note that any real threat to Russian gas supply could lead to a jump in both European natural gas prices and Brent crude futures. In 2022, Dutch TTF gas futures spiked over €300/MWh due to supply fears, highlighting how sensitive the market can be. Although European gas storage is currently around 92% full, data from July 2025 indicates that Russian LNG still makes up nearly 10% of the EU’s gas imports. Removing this supply would carry significant risk of price increases, making call options on winter 2025/2026 gas contracts a useful hedge. However, we must consider the potential for a peace deal in Ukraine. If the conflict ends, the geopolitical risks affecting oil prices would decrease, likely causing prices to fall as worries about supply disruptions fade.

Conflicting Signals in Energy Markets

These two developments are pushing energy markets in opposite directions, leading to increased volatility. The Cboe Crude Oil Volatility Index (OVX), which has been around a calm 35, is expected to see a significant increase soon. The mixed signals make it risky to make directional bets, but strategies that profit from large price swings are now more appealing. We believe the best approach is to buy volatility in the energy sector. We are looking into long straddles on near-term Brent crude options to take advantage of significant price movements in either direction. This strategy allows us to benefit from rising uncertainty without needing to predict whether supply cuts or peace talks will be the dominant factor. Additionally, a potential end to the war could have major effects on European stocks and the defense sector. Shares in companies like Germany’s Rheinmetall AG have risen over 400% since the conflict began in 2022, and a ceasefire would likely lead to a quick reevaluation of these stocks. Traders might want to buy put options on major European defense contractors while also considering call options on broad European indices like the Euro Stoxx 50, which would benefit from lower geopolitical tensions and reconstruction opportunities. Create your live VT Markets account and start trading now.

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Mark Carney’s first budget as Prime Minister will be revealed on November 4. The date changed from an earlier hint of October, with Finance Minister Champagne announcing the new date in the House of Commons.

Economic Directions and Tax Policy

This budget is expected to change the economic landscape. It will emphasize moving away from the United States and focusing on nation-building projects. Talks about home-building measures have started, and more details are likely to come soon. Tax policy will be crucial, with changes expected to affect bonds and the Canadian dollar. Carney confirmed a cut in the income tax rate to 14% for earnings below $58,000, with possible adjustments to corporate rates depending on actions from the U.S. Economists predict a deficit of about C$70 billion this year, up from the $40 billion projected in January, mainly due to the U.S. trade war. Carney aims to clarify the difference between regular operating deficits and those driven by short-term investments in infrastructure and growth. With Carney’s first budget scheduled for November 4, we are entering a time of uncertainty. This uncertainty also brings opportunities, so traders should prepare for more volatility in Canadian assets over the next seven weeks. Any leaks about tax policy or spending priorities could significantly impact the markets. The Canadian dollar is at risk due to the expected C$70 billion deficit. The loonie is already under pressure, trading below 73 U.S. cents, and could drop further if budget financing disappoints investors. We’ve seen implied volatility for November CAD options increase, indicating that the market is preparing for a big shift.

Market Reaction Strategies

In the bond market, the yield on Canadian 10-year government bonds has risen to 3.9% in the past month, anticipating more government debt. If Prime Minister Carney does not convince investors that new spending is a sensible, long-term investment, yields could rise, driving bond prices down. Traders should monitor the difference between Canadian and U.S. bond yields, as a widening gap could weaken the Canadian dollar further. For stocks, nation-building projects may benefit the industrial and materials sectors. Similar infrastructure spending after the 2008 financial crisis led to strong performance in these areas. A long position in an industrial sector ETF, combined with protection against overall market volatility, might be a smart choice. Predicting market reactions is challenging, making strategies that profit from volatility appealing. Buying straddles or strangles on major Canadian stock index ETFs or currency futures could allow a trader to gain from significant movements in either direction. This approach is a wise way to trade around the event without betting on whether Carney’s policies will be seen positively or negatively. The ongoing trade war with the United States adds another risk factor, reminiscent of the unpredictable market reactions we observed in the late 2010s. Back then, tariff announcements often caused the Canadian dollar to swing by a full cent in a single day. Thus, holding short-term options through the November 4 announcement could lead to significant, asymmetric returns. Create your live VT Markets account and start trading now.

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