Proflex Market Update - Wk 16

Welcome to another weekly update from Proflex!

After a volatile few weeks, markets have bounced sharply, just as we anticipated in our prior updates. The tariff rollbacks and clarification on trade war targets have provided relief, particularly for tech and semiconductor names.

But let’s be clear: volatility isn’t over. Markets now face a clear ceiling due to two unresolved overhangs:

1. The China Trade War: While worst-case scenarios appear priced in, long-term clarity is still months away. The China deal remains elusive, and the playbook appears to be aggressive posturing first, negotiation later.
2. No Fed Support Yet: With liquidity looking tight in the bond markets, we might need Federal Reserve intervention, possibly via QE-style measures or expanded balance sheet support. Until then, rallies will be capped by macro uncertainty.

Electronics & Semiconductor Tariffs: Political Leverage

Last weekend saw a confusing volley on electronics tariffs — first a duty waiver announcement, then a walk-back saying new tariffs on semiconductors and smartphones are on the horizon.

What we’re seeing is a strategic game of carrots and sticks:

• NVIDIA has already responded by announcing major U.S.-based chip investments, positioning itself to receive waivers.
• Apple may need to accelerate U.S. manufacturing commitments to maintain its margins in a tariff-heavy environment.

Our take: This is political bargaining at scale. Companies will promise U.S. jobs and investments to secure waivers — which gives Trump the policy wins he seeks without destabilizing markets completely. China must be watching this carefully and willing to wait it out as US walks back on the tariffs in major sectors.

💵 Bond Market Watch:​
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Treasury Yields, Gold Surge, and the Japan Equation

Earlier in the month, 10-Year yields dipped below 4%, only to bounce back sharply as foreign entities — especially China & Japan — dumped U.S. Treasuries and rotated into Gold.

Why this matters:

• Treasury selling = higher long-term yields = tighter financial conditions.
• Gold is surging — a clear sign that safe-haven demand is moving towards Gold from USD.

We have been bullish on Gold since early 2024, and are now raising our long-term price target in light of:

• Geopolitical instability.
• Sovereign reserve rebalancing.
• Bond market stress.
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Japan-U.S. Trade Talks:

This week’s Japan-U.S. negotiations are crucial. Japan — heavily dependent on U.S. trade and exposed to Yen carry unwinds — is likely to strike a quick deal, providing short-term relief to markets.

We are also watching closely for:

• Any YCC (Yield Curve Control) actions from the U.S. Treasury.
• A potential announcement of buybacks or other liquidity support.
• Fed reaction as QT winds down — next move could be dovish.

Outlook: Markets at a Crossroads

• China’s escalation has raised the stakes. This is not a short-term bluff but a serious shift in trade relations.
• Bond market stress is now front and center. Without Fed support, equity rallies will face headwinds.
• However, much of the worst-case scenario is now priced in — particularly in tech and industrials.
• We continue to expect sideways volatility with sharp, opportunistic entry points to accumulate high-conviction names.

📢 Join the Discussion in Our Macro WhatsApp Group!​
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Proflex Subscribers – Staying Ahead of the Curve 📈

Separating Noise from Signal: In volatile markets, we help subscribers stay disciplined and focus on strategic long-term opportunities.

Best regards,

Raman Bindlish

Editor-in-Chief,

Blockstart Research

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