Good morning investors. One more day till Friday — today we’re covering the stock market’s resilience, whether gold prices should worry you, and the Euphoriameter. First time reading? Join 190,000 self-directed investors gaining an edge every morning. Sign up here. 

Bullish and bearish signals

China’s DeepSeek and President Trump’s tariffs can’t seem to derail the stock market. 

The S&P 500 is coming off back-to-back winning sessions, shrugging off two sizable sell-offs in back-to-back weeks as well as a weak showing from Big Tech earnings.

Justified or not, much of the stock market’s resilience can be chalked up to confidence in the broader economic outlook. 

“While a prolonged, multi-front trade war could certainly cause a US recession and significant stock market losses, it is way too early to give up on the American economy,” said DataTrek Research co-founders Nicholas Colas and Jessica Rabe.

Here’s a snapshot: 

Indeed, stocks have reflected that strength. The S&P 500 is up nearly 23% over the last 12 months. 

Notably, too, oil prices have barely budged over the last year. Fresh tariffs, in DataTrek’s view, are unlikely to double the price of crude this year — a move that’s previously been the harbinger of a recession. 

In any case, President Trump’s second stint in the White House has so far delivered on expectations for a non-stop news cycle, fueling elevated market volatility.

Still, the president has no incentive to cause a downturn. 

Trump has a reputation for prioritizing the opposite: He’s historically been fixated on pushing asset prices higher. 

That said, surging gold prices suggest investors are not taking into account the risk of a recession.

It’s also unusual that the precious metal is hitting record highs because it’s happening at the same time the US dollar is getting stronger. 

“Investors don’t realize how high the risk of a recession is, and they’re overly optimistic regarding the economy and risk assets,” said precious metals analyst Jesse Colombo, who covers gold markets in The Bubble Bubble Report.

On the prediction platform Kalshi, traders assign a 22% chance to a recession hitting before 2026, down from 53% before the election.

In Colombo’s view, the stock market looks vulnerable due to the widespread and excessive optimism.

As a result, the market is extra sensitive to disruptions like DeepSeek or tariffs. 

Investors are currently sitting on a record-high allocation to stocks near 50 percent, and the Euphoriameter — which combines Forward PE, volatility, and sentiment — has surpassed dot-com levels. 

Throw in the dwindling outlook for Fed rate cuts and suddenly the equation is not so obviously positive. 

Then again: 

Case in point, here’s what the team at Yardeni Research told clients on Wednesday: 

“We’re still in buy-the-dip mode for the US Large Caps on the basis of volatile macro news but solid fundamentals.” 

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Elsewhere:

📈 Qualcomm beat earnings estimates. The company issued strong guidance for the current quarter following an 18% revenue jump year-over-year, but the stock still dropped roughly 5% in overnight trading. (CNBC)

🏦 Chicago Fed President Goolsbee warns on tariffs. In a Wednesday interview, the central bank official said a potential trade war could derail the Fed’s progress on inflation: “Supply-side disruptions can have a material impact on aggregate inflation. They aren’t always just minor disturbances that average out at the macro level.” (Barron’s)

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