Yesterday I talked about the wall of worry that markets need to scale and all the risks ahead, setting out bull and bear cases...the mood today is very much optimistic with tech leading a rally on Wall Street to take the S&P 500 to within a whisker of a record high.  The Nasdaq and Dow rose almost 1%, while the small cap Russel 2k was up 1.7%. European stock markets are on the up this morning with the FTSE 100 rallying about 0.3% as it continues to prise itself off a 4-week low hit this week, while the DAX and CAC pushed up around 1% apiece as the rubber hits the road in terms of Nato defence spending. Shares in Tokyo rose to a 5-month high.

Trade noises are positive The U.S. and China have confirmed their London agreement on rare earth and tech, while the White House said Trump’s trade deadlines in July could be extended. Trump’s July 8/9th deadlines for restarting tariffs are “not critical,” White House press secretary Karoline Leavitt said. That’s one of the major risks for markets dealt with I guess.

The other relates to the Fed, and some weak US data helped nudge the needle on when the market thinks the next cut is coming. US GDP was way lower than expected, as was inflation, boosting rate cut chances. Q1 Personal consumption came out softer at 0.5% vs exp 1.2% and lowest since Covid era. Annualised GDP QoQ came in -0.5% vs est -0.2% and below all estimates. US monthly PCE inflation is due out today.

In short, markets are ignoring the noise – looking ahead to lower rates, fiscal stimulus in Europe, deregulation for banks on Wall Street, lower inflation and trade deals – hardly the negative environment everyone has been shouting about. But watch out for July 9th. And the big beautiful tax bill, on which a vote could happen this weekend.

Lame ducks – we could soon have a lame duck Fed chair if Powell’s replacement is named early. We  also, amazingly, almost have a lame duck prime minister in Britain as Keir Starmer has been forced to climb down over welfare reform. Mishandling of economic policy has soured the milk and honey they promised.