Through the Fog: Searching for Clarity in Choppy Markets

Introduction

Markets are entering a period of heightened ambiguity as competing signals emerge from economic data and policy developments. While some indicators continue to reflect resilience, others suggest the momentum is fading. Layered on top of this are intensifying geopolitical and trade tensions, particularly around tariffs, which are once again casting a long shadow over investor sentiment. As a result, markets appear to be entering a phase of consolidation, with participants searching for clarity in an increasingly murky environment.

Tariff Saga is Set to Continue

The economy is beginning to display mixed signals. Some indicators suggest continued strength, while others point to a slowdown. This divergence is particularly intriguing and may help explain why markets appear to be consolidating. For example, gold has traded sideways since mid-April, while the S&P 500 has lost momentum after a strong rally from its 7 April low.

Tariffs, a key source of market uncertainty, are themselves in a state of flux. Last week, the Court of International Trade blocked a significant portion of President Trump’s tariffs, arguing that the International Emergency Economic Powers Act does not authorise the imposition of such measures. However, less than 24 hours later, a higher court put that ruling on hold.

The saga is set to continue until a final ruling is delivered. In the meantime, uncertainty will remain a persistent headwind—markets, after all, abhor uncertainty. Even if the tariffs are ultimately struck down, the ambiguity may persist, as the Trump administration is likely to pursue alternative means to achieve its aims.

Meanwhile, other variables are adding to the growing complexity of global trade. The United States and China remain at loggerheads, each accusing the other of breaching their recent trade truce. While there are reports that Presidents Trump and Xi plan to speak, no call has yet taken place.

Adding to the mix, President Trump announced on Friday plans to double tariffs on imported steel and aluminium from 25% to 50%. This drew a swift response from the EU on Saturday, with officials stating that the bloc is “prepared to impose countermeasures, including in response to the latest US tariff increase.”

Naturally, the 90-day reprieve granted to the tariffs imposed on “Liberation Day” is nearing its end on 8 July. If there are gaps in the ongoing negotiations, this could present yet another headwind for the market.

Key Economic Data Needs to Be Supportive

All of this points to the considerable uncertainty still facing markets. One way to navigate this is by turning to alternative measures of economic activity that may help reduce the ambiguity. The hope is that these indicators can help fill the vacuum left by trade-related uncertainty.

Yesterday’s ISM Manufacturing PMI, didn’t do a good job of this, appearing weak at face value, edging down to 48.5. However, the survey’s forward-looking component—New Orders—ticked up from 47.2 to 47.6, though it remains in contraction territory. Similarly, the employment component rose from 46.5 to 46.8, marking a slight improvement, yet still indicative of contraction.

This week brings the all-important jobs report on Friday. A strong reading could help push back against the prevailing uncertainty, while a weaker print would likely add to the pressure. Wednesday’s ISM Services PMI will also be closely watched, as services data offer a strong reflection of the U.S. economy, given its heavy reliance on the services sector. A sustained drop below 50 would be a worrying development, so a solid reading above that threshold is exactly what’s needed to help fill the current void.

S&P 500 Key Level

The S&P 500 has had a remarkable run since hitting its recent low on 7 April. Since then, the index has carved out a pattern of higher troughs followed by higher peaks—the hallmark of an uptrend. Additional bullish signals include the EMAs crossing positively (white circle) and the RSI moving above 50 on 24 April and remaining in positive territory since.

Given the prevailing uncertainty in the market, it is unsurprising that 5,970 has emerged as a key resistance level. For the uptrend to remain intact, the index will need to break decisively above this threshold. So far, however, this level has proven resilient, with the index repeatedly failing to close above it with conviction.

If this week’s economic data suggest a slowdown, the 5,970 level may continue to cap gains. A bearish crossover of the EMAs and a move by the RSI back below 50 would signal weakening momentum and raise concerns about the durability of the recent rally.

Conclusion

With markets caught in a crosscurrent of geopolitical tension, policy ambiguity, and conflicting economic signals, investors face a complex and fragile environment. Much now hinges on upcoming data releases, which could either validate the recent uptrend or trigger a reassessment of risk. Until greater clarity emerges—particularly around tariffs and broader trade relations—markets will lean heavily on each new data point for direction. In such conditions, vigilance and adaptability are paramount, as the line between consolidation and correction could prove perilously thin.