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The S&P 500 finished the session barely changed, caught in a tug-of-war between blockbuster tech earnings and a broader tape weighed down by month-end rebalancing and profit taking. Microsoft (MSFT) and META may have lit up the scoreboard, but the rest of the field limped toward the close as systematic and discretionary players trimmed risk into the dog days of August.

If the FX options market and VIX August futures (VIQ25) are telling the truth—and they often whisper more than they shout—then the rest of the summer could be a snoozer. Implied volatility has melted like a popsicle on a Bangkok pavement, with traders signalling little appetite for bold new FX and equity exposure once this week’s macro fireworks pass. August, in short, may be the month the Street quietly goes fishing.

Pro traders, like pro golfers, aren’t swinging for the pin on every hole. Even the best only hit 60–65% of greens in regulation, which means it’s all about playing the high-percentage shots. You don’t pull the big stick unless the setup is clean, the wind’s in your favour, and the reward outweighs the risk.

And August? That’s not the time to force a hole-in-one. It’s the time to walk the course, keep the swing loose, and protect your scorecard. Capital preservation is the August play—lay up, chip close, and tap in. The big bets can wait until the fairways get crowded again in September.

Despite intraday records in both the S&P 500 and Nasdaq, the final hour pullback felt more like end-of-month housekeeping than genuine risk aversion. Microsoft's Azure cloud revenue punched through the $75 billion mark, and Meta delivered a surprisingly bullish Q3 outlook, sending the stock up double digits. Microsoft now sports a $4 trillion market cap—an astonishing figure, yet it barely managed to lift the broader market tide.

This reaction—muted despite meaty earnings and buyback flows—speaks less to fear and more to fatigue. It's profit-taking dressed in summer linens, not exit-chasing in panic gear. Downside moves were contained, the tape more wobbly than wounded, but don’t ignore the low liquidity summer time air pockets, espeically when the tech boom is no longer a rising tide lifting all boats—it’s a selective surge, increasingly polarised and carried by just a few.

Nvidia and Microsoft have launched to new all-time highs, each now trading nearly 20% above their prior peaks. But Apple, once the undisputed king of global equity markets, is languishing almost 20% below its early 2025 high. That’s a $700 billion drop in market cap—an event that in any other era would have rattled the S&P to its core. And yet, this time, the market shrugged. The meteoric gains in Nvidia and Microsoft have more than offset Apple’s stumble, masking what’s really a deepening fracture in tech leadership.

As I mentioned yesterday, “higher for longer” isn’t really an obstacle for these mega-cap tech titans. Not when they’re sitting on war chests of cash, throwing off free cash flow like central banks used to print reserves. Microsoft, Apple, and Nvidia aren’t borrowers—they’re lenders to the market. Higher rates may tighten the screws for capital-intensive sectors or high-yield debt issuers, but for these giants, it’s background noise. The only thing they’re borrowing is attention—and lately, they’ve got all of it.

Yet what we’re seeing now is the slow but clear unraveling of the “Magnificent Seven” as a cohesive trade. Microsoft is soaring, Apple is slipping, Tesla’s rally feels tired, and Alphabet is stuck in a range. US tech is no longer trading as a monolith, and that has serious implications for passive exposure and index-linked flows. This isn't a sector rally—it’s stock picking season again.

More concerning is the narrowing of AI euphoria. The bid has become ultra-concentrated in just a handful of names, turning what was once a sector-wide re-rating into a micro-bubble. Microsoft’s recent ascent is almost too smooth, too perfect—a straight-line move that rarely ends well. Stocks aren’t supposed to climb like that. When they do, it usually signals either blind exuberance or a complete capitulation of the shorts—neither of which is sustainable.

So while the Nasdaq still prints fresh highs, beneath the surface, dispersion is growing, breadth is thinning, and capital is becoming more selective. The illusion of strength is being held together by just a few names with near-impenetrable balance sheets and dominant narratives. And when a single instrument is carrying the market’s melody, any missed note echoes louder than it should.

Traders were also busy repricing Fed odds after Powell’s press conference left the rate-cut calendar wide open. Sticky inflation data didn’t help, with core PCE for June reaccelerating just as consumer spending lost steam. It was a reminder that monetary policy is still navigating crosswinds—and that the September decision is far from locked.

Meanwhile, geopolitics returned to the front page. Trump extended a 25% duty on Mexican imports for another 90 days and is expected to sign a battery of executive orders by Friday, enforcing higher tariffs on countries like India, Brazil, and others not already inside Washington’s tent. With the EU, UK, Japan, and South Korea already locked into bilateral deals, attention now shifts to China. Treasury Secretary Scott Bessent struck a cautiously optimistic tone, saying talks with Beijing “have the makings of a deal,” but timelines remain elusive. The tariff truce expires August 12, and the clock is ticking.

Still, July was no slouch. The S&P 500 is up over 2%, the Nasdaq nearly 4%, and even the Dow squeaked out a modest 0.6% gain. But as the calendar flips, positioning looks ripe for capital preservation strategies. This is the season when the smart money often closes the books early—especially with a major jobs report and tariff enforcement deadline looming just as traders eye their summer escape.

In short, the music is still playing, but the dance floor is thinning out.

Is the King Back?

The dollar’s nearly 2.5% surge this week is no small feat—especially for a currency as liquid, deep, and globally entwined as the greenback. Moves like this don’t come out of nowhere, and they don’t usually stop on a dime either, and there are still a few compelling reasons to believe this dollar move isn’t finished—not by a long shot.

For starters, the market remains far too dovish on the Fed. Futures still price in a rate-cutting cycle through the back half of 2025, leaving ample room for repricing if growth holds up and inflation proves sticky. The macro narrative has been dominated by trade war drama. Still, once that dust settles—as we suggested two weeks ago—markets will likely revert to core fundamentals, where U.S. growth outperformance and yield differentials reassert themselves. The “U.S. exceptionalism” story isn’t dead; it’s just been waiting for the trade war intermission to end.

Then there’s positioning. Dollar shorts were built up over months of consensus bearishness amplified by virtually every Wall Street analyst calling 1.20 + on EURUSD. That wall of supply is now being unwound in real-time. What we’re seeing is not just a rally—it’s a proper squeeze. And we’re not even close to the end of it. The most potent force in FX isn’t central banks or trade policy—it’s price action. And price action has just shattered the dominant market narrative that the dollar would fall in a straight line toward 1.25. That level now looks like fantasy land, a relic of a different macro regime.

What does August imply?

To draw on the golfer analogy, there’s a reason I’ve shelved the big stick and shifted toward a short-stroke game. August doesn’t look like the month for hero shots. We’re in that “drive for show, putt for dough” phase of the market—tight, tactical, and reactive rather than bold. The EUR/USD vol curve says it all. Implied volatility collapses once this week’s event risk clears. One-month vol is trading a full figure below one-week, which is rare and telling. The market’s not buying long-term turbulence—it’s renting short-term protection. Vol is being priced like a weekend tee time: you’re in, out, and back to the clubhouse before the crowd even wakes up. I think this should support the dollar from an August carry perspective.

What that tells me is simple: the market’s attention span is short, conviction is thin, and liquidity is shallow. This is the environment where you keep the shots low, hug the fairway, and don’t overthink the wind. Let the macro noise play out, fade the overreactions, and pick your trades like you take your putts—deliberately, patiently, and with respect for the grain. The big moves will come again. But right now, it’s about tapping in, not swinging for the green in two.

As for the tariffs, most desks now view them as transactional, not ideological. Trump may impose a fresh round of duties by executive order, but the prevailing assumption is that they’re bargaining chips. Markets are beginning to bake in a baseline 15% tariff that gets lifted if enough money flows back into U.S. soil—either via investment pledges or trade realignments. The view is that these are leverage plays, not permanent trade barricades.

Of course, there’s still headline risk. The spectre of secondary sanctions on China, India, or Turkey—especially over Russian oil flows—could rattle sentiment. But for now, volatility continues to drip lower across asset classes. Unless something genuinely disruptive hits the tape, August could shape up to be exactly what it always threatens to become: a month of low conviction, low liquidity, and low vol.

Everyone’s waiting for the next significant macro catalyst. But judging by the price action this week , the dollar may have already found it.

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