Risk is rising

The Fed will conclude the first FOMC meeting of 2026 today. No rate cuts are expected, but the press conference at 2pm EST will provide more infoamtion on the current thinking of the Central Bank. One of the topics that is gaining momentum is the dollar. Comments made by President Trump yesterday, taking importance off the recent weakness of the grenback sent the currency to new lows. It remains within the recent normal range but is approaching the lowest part of it, which should be a cause of concern, but for the moment, it isn’t. Another topic that may not be raised today but is gaining momentum is the lack of volatility in a market that is being bombarded by geopolitical news, despite having huge concentration and very high valuations. In the upper part of the chart below, you can see how the MSCI All country index is incredibly sensible to the well being of 10 stocks (24% weight). In the lower chart, you can see two lines: the yellow one is the value of the S&P500 measured in gold, and the white one, is the volatility of the index. Notice how every time in history where the ratio goes below 1.5 (S&P/gold), the volatility spikes. We’re now at that turning point, in a market where investors are embracing the “Buy the Dip” mentality, because it has worked wonderfully over the last few years. Risky conditions are piling up.

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