As of today, February 4, 2026, we’re witnessing significant shifts across global financial markets, heavily influenced by a combination of macroeconomic data, central bank stances, and geopolitical developments. Personally, I see the trajectory of investors’ sentiment leaning cautiously optimistic, especially in the context of the US economy’s performance and global interest rate expectations.
The S&P 500 reached another record high today, buoyed by better-than-expected earnings from a number of US tech and consumer discretionary giants. Apple and Amazon both exceeded Wall Street’s profit estimates, fueling a strong rally in the tech-heavy Nasdaq, which gained over 1.3% by mid-day trading. The resilience of corporate profits in the face of slowing consumer spending and persistent inflationary pressure has surprised even seasoned market watchers like myself.
However, the real driver of today’s optimism stems from clarity provided by the Federal Reserve late last week. Fed Chair Jerome Powell signaled that while rate cuts are not imminent, the central bank is increasingly confident that inflation is on a sustained downward trajectory. This aligns well with the recent core PCE print—which showed a 2.2% YoY increase, the lowest in over two years. Markets have now priced in a 60% probability of a rate cut in the June FOMC meeting, according to the CME FedWatch Tool. In my view, the bond market’s reaction—specifically the decline in 10-year Treasury yields to around 3.85%—demonstrates that investors are positioning themselves for a gradual easing cycle in the second half of the year.
Over in Europe, the ECB’s latest communication reinforces a more hawkish stance relative to the Fed. Christine Lagarde emphasized the need to curb services inflation, which remains sticky across the euro zone. As a result, the euro weakened slightly against the US dollar, now trading near 1.0740. From a currency trading perspective, I’m monitoring EUR/USD closely; a break below 1.0700 could trigger more downside, especially if US economic data continues to outperform. The USD Index (DXY) climbed to 104.10 today, reflecting renewed strength thanks to risk aversion in emerging markets.
Speaking of emerging markets, China remains a pain point. The Shanghai Composite fell nearly 2% amid growing concerns about the property sector and investor confidence. Despite the PBOC adding liquidity through open market operations, domestic sentiment remains bearish. The Hang Seng Index also slipped, reinforcing my belief that capital will continue to favor developed markets in the near term. Foreign outflows from China’s equity markets reached over $1.2 billion this week, underscoring how geopolitical tensions and inconsistent policy responses are discouraging institutional participation.
In commodities, oil prices declined as WTI futures traded around $72.30 per barrel, weighed down by weak demand signals from China and rising US inventories. Gold remains steady above $2050/oz, supported by lower yields and continued central bank buying. For now, I believe gold retains its role as an effective hedge against macro volatility, especially in a soft landing scenario where equities and bonds could realign.
Looking at today holistically, the markets are in a delicate equilibrium. Investors are balancing between optimism over disinflation and corporate resilience, and risk factors like geopolitical tensions (primarily in the Middle East and Taiwan Strait), diverging central bank policies, and the looming US presidential election cycle. From a personal standpoint, I remain constructive on US equities, cautious on China, mildly bullish on gold, and neutral on oil until more clarity emerges on demand trends.