Yesterday, Japan’s Nikkei smashed past 50,000 points for the first time ever, Wall Street futures popped, and even Bitcoin joined the fun.
The reason?
Hope that Donald Trump and Xi Jinping will “extend” a trade truce at their upcoming meeting in South Korea.
But here’s the thing – markets are acting like we’re heading back to the good old days of globalisation. In reality, we might be stepping into a new phase of strategic interdependence, where the US and China need each other… but trust each other less than ever.
This week marks the first meeting between Trump and Xi since 2019 – and the stakes couldn’t be higher.
After Beijing recently announced export controls on rare earths, Trump threatened a 100% tariff on Chinese goods.
Now, after some weekend diplomacy in Malaysia, both sides seem ready to tone things down: China may delay the export curbs, and US officials are calling the talks “very positive.”
Investors, desperate for good news, took that as a green light.
Asian markets soared – the Nikkei up 2.5%, Kospi up 2.9%, CSI 300 and Hang Seng in the green. Over in the US, futures pointed to fresh records for the S&P 500 and Nasdaq, right before the Fed’s upcoming interest rate decision.
Optimists see this as proof that cooler heads are prevailing – that both countries “need each other” economically. But beneath that calm surface lies a much more calculated dance.
Let’s be clear: Trump and Xi aren’t “making up” – they’re managing escalation.
The US wants to protect its tech leadership (especially AI and chips), while China wants to safeguard access to critical components and financial stability.
What’s changed since the last truce? 2 things.
Global supply chains have rewired.
The West has learned to live with “China risk.” Companies have quietly shifted production to Vietnam, India, and Mexico. Even if the US and China smile for the cameras, no one’s going back to the pre-trade-war era.
The AI race has become the new battlefield.
When investors cheer that “the AI trade and semiconductors moving across borders continues to get the green light,” they’re half-right. The truce might keep chip exports flowing for now – but both sides are also building self-sufficiency. Think of it as a “temporary ceasefire in an arms race.”
So while traders see a rally, policymakers see a fragile détente – a necessary pause before the next phase of economic containment.
In short: markets are celebrating peace, but geopolitics is quietly pricing in a long-term divorce.
If you’ve been following my newsletter since late last year, you’ll know I’ve been saying one thing consistently: the world is bigger than the US, and it’s time to think global.
Back then, I was encouraging my clients to move into global equities, especially into Asia and Europe – even before Trump’s political comeback. The logic was simple: monetary tightening was peaking, valuations were fair, markets had already priced in a lot of bad news, and we don’t know what Trump will do.
Fast forward to now – and global equities have delivered. The S&P 500 and Nasdaq are both near record highs, Japan’s Nikkei just broke 50,000 points, and the MSCI All Country World ex USA?
Doing better.
Investors who stayed globally diversified are sitting on healthy gains.
So yes, it’s nice when the data backs up what we’ve been talking about for months – but more importantly, the current rally reinforces why long-term positioning beats short-term guessing.
Here’s how I’m thinking about portfolios from here:
1. The semiconductor squeeze isn’t over – it’s morphing.
The Trump–Xi “trade truce” is good for sentiment, but it doesn’t erase the underlying rivalry. The US and China both want chip independence – they just can’t get there overnight.
That’s why I’ve kept some exposure to semiconductor leaders (like Nvidia, TSMC, and ASML) but balanced it with positions in infrastructure and AI enablers – areas that benefit regardless of who wins the tech race.
Investors who followed this approach – especially through global and tech-focused funds – should continue to see medium-term upside, though I’m also carefully watching for overheating signals in the AI trade.
2. Gold and safety assets are still insurance, not dead weight.
Gold’s 3% drop last week might make it look irrelevant again – but that’s just the market doing what it always does during “peace rallies.”
For my clients, gold and bonds still serve as portfolio shock absorbers. They don’t need to outperform equities – they just need to buy us time when everyone else panics.
3. The Fed is still the biggest driver of everything.
Let’s not forget the invisible hand behind all this optimism: the Fed.
Falling inflation and an expected rate cut have done more for risk assets than any political handshake could.
Geopolitics moves headlines, but liquidity moves markets.
As long as the Fed keeps the door open to easing, the rally has legs. But it also means we’ll see more volatility the moment rate-cut expectations change.
So my approach now?
Trim into strength, keep dry powder, and stay global. This rally is real – but it’s not risk-free.
This week’s optimism isn’t just about Trump and Xi smiling for the cameras – it’s about markets convincing themselves that cooperation is still possible in a divided world.
Remember that every “peace rally” eventually gives way to “policy reality.”
The long-term winners will be those positioned for a world that’s connected, but competitive – where trade flows, supply chains, and technology evolve faster than headlines.
If you’ve stayed invested, this year has rewarded patience. And if you’ve stayed diversified, you’re better protected for what comes next.
So let’s keep perspective: enjoy the gains, but don’t mistake calm for certainty. Markets are hopeful – but smart investors are prepared.
Stay informed. Stay invested. And stay global. 🌏