KCM Trade | Market Commentary | Tim Waterer | Risk Assets Are Up and Running in 2026
Risk assets are up and running in 2026, with traders seemingly unperturbed by the US’s recent forays into Venezuela. Stock markets often turn cautious when geopolitical dramas unfold, but not on this occasion and that’s because there doesn’t appear to be any upside inflationary risks. In fact, it could be the opposite, should more Venezuelan oil now start to make its way onto the global market (on the lifting of sanctions, increased investment in drilling infrastructure etc.).
Based on the S&P500 chalking up fresh record highs, this is apparently one military intervention by the US that financial markets have taken a liking too. Even Venezuelan stocks have joined the party. Now we wait to see how smoothly or otherwise the transition of power takes place in Venezuela.
Oil prices have been jumping around in the wake of Maduro’s removal from power, but the overall takeaway is that there is likely to be more, not less, oil supply from Venezuela entering the global market as a consequence. Heavy oil (which Venezuela has plenty of) has its challenges compared to light crude when it comes to the extraction and refinement processes, but if Trump can tempt US oil companies to invest in the South American country, then production numbers could ramp up, but this is not the work of a moment. We are talking something which could take many months or a few years. That is why price moves in oil this week have not been off the charts.
The events in Venezuela have highlighted the seemingly ever-present geopolitical risks which face the market, and with questions swirling about what might come next (Greenland?), traders have again flocked to gold and silver. Risk assets like stocks and so-called defensive assets like gold and silver don’t always rise in tandem but that is what we are seeing, with investors taking a particular liking to precious metals as a defensive play and a hedge against potential future geopolitical risks. Silver has made its way back above $80, while gold has reclaimed $4500 and could be hunting for fresh record highs in the near-term should the current buying momentum persist. Levels to watch for spot gold this week include support at $4452 and $4410, while resistance awaits at $4518 and $4540.
In currencies, the Australian Dollar (AUD) has made a spritely start to the year by gaining 1% against the greenback thanks to higher commodity prices and expectations that the next move in Australian interest rates may be a hike. The AUDUSD rate has hit its highest level in more than a year and currently trades around 0.6740. All eyes will be on Australia’s next CPI print (due today), and if another upside surprise is produced by the inflation data the Aussie Dollar could be making a push beyond 0.6750. But any signs that inflation has eased could see profit taking set in following the recent rally.
Looking ahead, US jobs data stands out as potentially the most sentiment-shifting theme for the rest of the week, with the ADP report due today, jobless claims tomorrow, and Friday's official nonfarm payrolls (NFP) the main event. Markets continue to speculate on the timing of the next Fed rate cut, and whether this week's figures land stronger or weaker than expected could meaningfully shape those probabilities. For Friday’s NFP, we are looking for approximately 65k jobs to have been created, which would be a similar result to the prior reading. If the jobs data this week is soft enough to warrant further Fed rate cuts, but not too dire to sound the economic alarm bells, this could preserve the current bullish trajectory of risk assets.