Image Source: Pexels

The S&P is ripping higher, clocking in a six-day surge north of 8%, putting it on pace for its best winning run since Q1 2022. That’s despite a macro minefield littered with crumbling consumer confidence, wobbly labour data, and uncertainty around earnings rollouts from marquee names.

Yet traders are leaning in, not fading. Why? Because markets are front-running the policy pivots before they hit the tape.

Let’s break it down. Treasuries are extending their April rally, aggressively repricing a Fed pivot as the drumbeat of recession grows louder. This is providing a springboard under every equity dip, and re-leveraging is back in style. CTAs are chasing the upside, volatility control funds are auto-buying, and corporate buybacks are burning through the float. Retail isn’t just nibbling anymore — they’ve become full-blown price-takers now.

So why the rock-fueled rally when everyone was preaching doom and gloom?

Simple. Valuations are screaming on one thing: the market doesn’t believe the max-tariff scenario sticks. Electronics have already been carved out. Autos just dodged a policy freight train. The rest? A matter of timing. These embargo-tier levies are politically unsustainable, and traders know it. Whether it’s a quiet Beltway quid pro quo, backdoor lobbying, or just good old political survival instincts when the Presidential approval rating plummets, these tariffs will get rolled back. And when they do? The tape will rip roar.

It’s also worth noting that we’re deep into the “reflexivity zone.” The White House put is real, not just in equities but thoroughly embedded in the bond market. Every time the plumbing creaks, a Treasury backstop( thought to be 4.50 % in 10s) is in place for the duration. Add Waller’s recent nod to a live Fed put if NFP buckles, and you’ve got monetary gasoline under the hood.

Meanwhile, the two titans of the tariff war — the U.S. and China — haven’t blinked, and the economic fallout is no longer theoretical. U.S. ports are clogged with bottlenecks, and in China, export engine parts are cracking. Factory closures are cascading like dominoes. Treasury Secretary Bessent didn’t mince words, warning of a potential 10 million job loss wave in China — and that’s likely conservative.

Yes, the dollar’s been radioactive — any sniff of a hard data rollover is getting punished. We’re entering the sweet spot of the 2–5 month lag between soft survey slumps and hard data cracks. The Citi Economic Surprise Index flipped negative in January — that puts us smack in the danger zone now. If this week’s labor or inflation prints slip, they’ll do it off a much lower real economic base than most models are priced for. That’s not just bearish for growth — it’s borderline doom setup for the dollar .

But — and this is critical — never underestimate the American consumer’s uncanny ability to pull a late-cycle rabbit out of their purse. This is the paradox: the macro setup is fragile, but if the consumer hangs on, markets will keep squeezing higher. Still, for FX, this is live-fire territory: the dollar is looking increasingly vulnerable. If Friday’s NFP flinches, the Fed’s hand gets forced — and dollar shorts will feast.

The dollar’s limp start to the week is a reminder that even if peak tariff fears get priced out, FX markets remain laser-focused on the greenback’s linkage to core U.S. economic performance. This week’s data slate offers multiple chances to lean short — especially if the hard data finally catches down to the soft.

Survey fatigue is real; markets aren’t reacting to the soft survey prints the way they used to. The game now is tracking the hard numbers, and more specifically, cracks in the labour market. That’s what’ll force the Fed’s hand. Until then, the dollar stays vulnerable. Every data release this week isn’t just a print — it’s a potential catalyst for a deeper repricing of U.S. growth and rate cut expectations.

More By This Author:

Tariff Tensions Ease On The Fast Lane — Asia Accelerates As Auto Relief Ignites Hope
Markets Breathe Easier, But Risks Still Lurk
Alpha Or Exit? Volatility Set To Trade Both Noise And Hard Data