Morning from Copenhagen.

Trump continues to make it hard for US equities to perform as we head into NFP later today, but we are starting to see signs that bearish risk sentiment is getting a bit too stretched. Extreme fear points are typically good entry points in risk assets, which we are starting to see now.

We are hence not in the “complete meltdown” camp in equities and actually see a fairly benign Q2-Q3 for US risk assets, as the credit cycle is still firing on all cylinders. This makes the odds of an Up, Up, Up regime fairly likely once the dust settles (and if Trump doesn’t drag the economy into a technical recession).

Economic policy uncertainty, as measured by sentiment in newspapers, is approaching 15-year highs (excluding Covid), and short-term volatility (1-month VIX) has exceeded medium-term volatility (3-month VIX), which has previously been a decent leading indicator of local bottoms in equities.

We expect a blunder later today when NFP gets released, but next week might be a very decent opportunity to load up on US equities once again.

Chart 1a: Economic policy uncertainty is at 15-year highs (excluding Covid)