With the US administration poking the geopolitical hornet’s nest and investors fretting about the “new normal” profit bottom lines for the stock market on stock darlings, this could be an absorbing month for risk as traders are starting to positioning for volatility event risk in May with an eye on June and July.

President Trump is back beating the trade war drums this morning saying tariffs would be the “ultimate punishment” on China. And increasing the odds of a significant volatility risk event as all roads lead back to trade and tariff.

Still, President Trump says a lot of stuff and this could be little more than political browbeating and pandering to the China hawks.

But while the market is already factoring in a less globalized world during the initial phase of the post-pandemic recovery as economies internalise but rekindling a dormant US-China trade war will likely make any economic improvement exponentially more difficult.

And ripping up the trade agreement will trigger a global equity market rout.

In Asia, all is not a bed of roses as trade war clouds once again loom ominously on the horizon as the hawks in the US administration are poking the trade war hornet’s nest while putting China in the crosshairs accusing the Wuhan lab as the epicentre of COVID19.

US equities closed the week lower, S&P 500 down a further 2.8% Friday. Tech shares came under pressure: Amazon.com reported a surge in revenue as lockdown measures prompted a rise in online shopping, but also a spike in costs, leaving profits lower than expected.

So Global markets are trading considerably lower after what Amazon highlighted, is that top-line growth is not translating into top-line profit growth. This is due to higher costs of business in the ‘new normal’ as both employee and customer health safety now become huge cash drains.

Questions are going to be asked as they always do every time, we have 100+ point sell-off since the multi-year outperformance of Facebook, Apple, Amazon, Microsoft, and Google has led to record-high market leadership concentration.

The narrow breadth of the market typically ends up the same way as limited market leadership usually catches down to the underperformers.

Everyone’s godfather of stocks, Warren Buffet, indicated he had sold all stakes in US airlines, and had not “found anything attractive” in terms of investment opportunities. Which is hardly a bullish rigging endorsement, and that in itself could send equity bulls back to the pen.

In New York, virus-related deaths spiked higher on Saturday, and the Governor indicated re-opening the state would not happen until at least 15 May rekindling fears around secondary outbreaks and suggesting there could further delays in more densely populated centres in the world’s largest economy.

Gold moving higher

Gold is moving higher as strategic hedging regimes kicked in ahead of a possible equity market rout, which is breathing new life into gold markets as prices look to be primed to move higher.

The uptick in geopolitical risks is the primary catalyst due to renewed US-Sino tension after the White House put China in the crosshairs accusing the Wuhan lab responsible for the virus while threatening a sweeping tariff retaliation in China

Gold is highly sensitive to geopolitical, especially as it relates to trade risks, which bolstered gold throughout much of 2019 when bullion prices soared 18%.

On Friday, after a White House press conference, President Trump said that he had a high degree of confidence that the COVID-19 pandemic originated in a laboratory in Wuhan, China.

The renewed focus on China has prompted a flurry of press articles about possible economic retaliation by the US, but all roads leading back to trade tariffs.

International markets analysis and insights from Stephen Innes, Chief Global Market Strategist at AxiCorp