Relative calm prevails after the 'tentative' Debt Ceiling weekend deal, but it is not a universal declaration that all is well, nor that catastrophe looms either. Rather, it's almost like unemotional quants driving the action (probably is) and we don't have the kind of celebratory debt response (much is still pending) at the same time as bank outflows needing to stabilize might be more pertinent.

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We do not have a 'new' (but rather existing and muddling) global recession in a way, with China actually more sluggish than the Western world, probably as new Covid and.or Covid/RSV virus waves circulate like winds off the Gobi. If anything is clear, it's that the S&P continues dominated (led as otherwise we'd see much lower levels) by the handful of most-tech big-megas as you know.

We might still get a shakeout in the market, but so far the stamina is adequate if not exciting, and we're working through the period that extends to mid-June, after which (especially if we get a shakeout before then), we'd look for upside. Led by China-Taiwan tension, there are other geopolitical concerns that might be more significant besides media's droning discussion of the Fed and Debt. And you have Oil prices softer, with China demand down, not just production.

Pus there's a Ukraine caveat.. as we look at numerous drones slamming into Moscow proper, not just military targets. No great damage, but tit-for-tat. Who can argue Kiev wouldn't be justified to inflict 'what goes around comes around' thrusts against the marauding Russians. Except for one catch: Kiev denies it. So there is the (remote?) possibility of triggering a new Russian Revolution?

That's all undetermined, but we already know there are 3 entities fighting that are not Ukrainian Army: a)Russian Army, b)Wagner mercenaries (Russians, mostly paroled convicts), and c) something called 'Free Russian Militia' (which appears to be Russians with a 'different view' of Russia's policies (but notice they have mostly American equipment from 'friends'). Ukraine denies it's them but acknowledges they are not unhappy to see Russians shooting each other.

Sort of ideal propaganda, especially if it's breakaway units of Russian military. Putin has ordered 'increased air defense of the Moscow zone', and actually it makes tactical sense for Ukraine, knowing Moscow is prepared to resist their forthcoming offensive, to be distracted by needed more defense of their cities, and possibly Kiev actually leapfrogs the Eastern Ukraine conflict zone that so heavily depleted their forces, and goes directly 'elsewhere', like maybe to stop what is an encirclement effort of Russia by moving more forces into Belarus. If Ukraine could stir up an anti-dictator revolt in Minsk that would be excellent, and probably a lot more popular even than trying to liberate Crimea or similar.

Regardless the markets will be watching all this, as well as the harder-line we see from China's military, refusing to meet our Defense Secretary Austin later this week on the sidelines at Singapore, which rebuffs the President's view of better relations with the Chinese... though for now some (including Musk who is there this week as Tesla has the biggest EV factory and needs continuity with the Beijing regime.. and no it doesn't make him 'pro' CCP, just business).

In-sum: 

this is a short trading week with no enthusiasm to get much going. In some ways this is the last day for Window Dressing related to some funds, or more likely for certain additions and deletions related to Russell changes (it's variable in some ways thus probably not worthy of overemphasis for now).

The geopolitical issues 'do' matter, especially China/Taiwan, should things get to a head prematurely.. with Beijing, ungrateful for all the American help over many years, chomping at the bit to overrun Taiwan.. and likely the appeal 'if' it is really happening, for Taiwan to be brought under protection of our 'nuclear umbrella', well that could be a tipping point Chinese militarists might exploit. I am not at all like the fear-mongers trying to peddle war for years in Asia, but I am concerned and keeping a close eye on these matters. It's essential now. I do concur with the idea that something is percolating in China... data feeds at this point are slowing down, which is inhibiting financial data reporting..

And sure, 'should' debt ceiling dealing falter due to key committee members, well that brings a threat to the compromised accord, we'll just have to see. So far it seems like 'grumbling' from the usual suspects feigning deficit concern. I also cannot draw conclusions from the latest Letter from developers about AI as an existential threat to humanity. They are serious people, EQ and IQ +AI, and maybe the worry is more about 10's of millions of jobs that might vanish.

I understand 'job destruction vis-a-vis job creation', but also recall my startled reaction several years ago when I was in the BMW factory in Munich watching a robot paint vehicles with dexterity of movement emulating the human hand. I especially cringed when noting the robot had been manufactured by 'Dachau Robotics' but the history of that place is not what remained in my thoughts .. rather that there were no humans involved in the paint work, just a remote 'handler'. This was before the current AI phase, but really it's clearly part of the same trend.

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