Why Geopolitics Doesn't Make Markets Panic

Financial markets are under pressure, especially when geopolitics gets involved. Right now, with concerns in the Middle East, you might expect the worst. Yet, the stock market isn't collapsing. In fact, indices are holding up pretty well. I invite you to decipher this surprising situation together, to see how I adapt my discipline, and why it's sometimes better to stay on the sidelines.

The Background: Diplomatic Hallway Rumors

Currently, tension is palpable between the United States, Israel, and Iran. On one hand, Donald Trump claims that negotiations are progressing. On the other, the Iranian government outright denies any discussion. Basically, we have completely contradictory information.

But honestly, nobody is lying. It's just the harsh reality of diplomacy. Crisis negotiations always involve intermediaries to maintain a structural safety net. Imagine a magnificent hotel. The Americans are in one room, the Iranians in another. Mediators pace back and forth in the hallway to pass messages. This is the famous open channel, an unwavering historical tradition.

Despite this constant blur, it's very clear that the markets are not giving in to panic.

Signs Proving the Absence of Fear

To get a clear view of the situation, you just need to look at the assets people flock to when things go wrong. And here, absolute surprise:

1. Gold is collapsing: Historically, when there is fear, people buy gold. Sheltering your money is human nature. Here, it has dropped by nearly 12.5%. It can't even hold its ground amidst the news.
2. Bitcoin is treading water: After a solid failure below $75,000, it lost 10%. It is now moving in a range, stuck around $70,000.
3. No flash panic: If the anxiety were total, we would lose 10% in a single day with trading halts. However, the current decline, although real, is spread out slowly and without destructive waves.
4. Oil is slowly going back up: Our WTI barrel is getting some vague color back. By the way, this reminds me of the Covid anomaly. The global slowdown was so severe that storage fees skyrocketed. They were almost paying you to take barrels off their hands because it cost an arm and a leg! Today, thankfully, we are far from such an extreme scenario.

My Discipline in Hesitant Markets

On the Nasdaq and the S&P 500, we are trapped in "ranges". Simply put, prices are moving back and forth within a narrow corridor of barely 1%, making cycles hard to read.

This morning, around 7:15 AM, I spotted a nice buying opportunity on the Nasdaq, precisely at my favorite level of 24,240. The market actually bounced back by 40 points shortly after. If I had taken the position, my day would have been made. Yet, I must admit I didn't take any trades.

Why such a decision? Quite simply because of the order book (the board displaying buy and sell requests). There was an immense gap between prices, commonly known as the spread. Liquidity providers were missing in action. To me, capital always matters more than ego. At 52, if I've survived crashes for 32 years, it's thanks to this strict prudence, especially outside European trading hours.

Over in Europe, the CAC 40 is attempting a difficult rebound above 7,800 points after long days of falling. The German DAX, meanwhile, is hanging on just below 23,000 points following a clear downward stratification of more than 10%. However, let's take a moment for nuance: stopping a retreat on a front line doesn't necessarily mean you've won the war. There is still strong bearish inertia within the charts, and solid confirmations will be needed to chase the doubt away.

Conclusion

To summarize, the current mental framework demands patience and an asymmetry of your risks. Indices often lack an obvious direction at certain times of the day, but there is no systemic panic in play. Stay cautious, always prioritize safeguarding your gains, and avoid trading at the slightest technical hesitation.

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