Risk assets regain ground as Trump weighs in on AI, energy

Risk sentiment has been improving steadily through the session, with equities climbing back to their best levels of the day even as they remain firmly in the red. The S&P 500 sits 17 points lower after having been down as much as 66 points.

The shift in tone coincides with oil giving up some of its gains and the 10-year Treasury yield pulling back from the 5.00% mark.

The underlying news hasn't shifted, but Trump has been posting constantly on social media, much of it pushing back against the bearish market narrative:

• He stated he won't impose regulations on AI, saying all it takes is a President with a high IQ
• He said Russia and Ukraine have agreed not to target energy infrastructure
• He said the conflict with Iran "will not be long"

Most recently, he called AI regulation a scam and a hoax, adding that "it will not be stopped" during his term. That has lifted technology shares.

The oil market remains skeptical of any Russia-Ukraine deal, given that Zelensky has essentially denied it, but I suspect Trump saw some midterm polling data today that he didn't like. He's surely aware that the Iran war is unpopular, and with the Houthis making advances, his position is deteriorating further.

What worries me is that Trump's latest rhetoric follows the same pattern as other 'hoaxes' he's promoted. That tends to rally a certain segment of the population in that direction and means that if there are genuine risks, the executive branch won't confront them. That could be supportive for stocks in the short term, but whether it's a positive long-term depends on how you view the real AI risks.

In any case, I wouldn't get too worked up about these moves until the FOMC decision on Wednesday.

Other risk assets are also seeing a corresponding pickup, including the Australian dollar, bitcoin, and gold. The US dollar has been steadily sold off since its early peak.