Past performance is not a reliable indicator of future results.

One catalyst may have come from the earnings front. While Broadcom delivered another strong set of results and reinforced the broader AI investment story, the reaction was more muted than investors have become accustomed to. That is often a sign that expectations had already become extremely elevated. The market is no longer asking whether AI demand is strong, that has largely been established. Instead, investors are beginning to question how much of that growth is already reflected in valuations. In that sense, Broadcom’s results may not have been disappointing, but they were perhaps not enough to justify another leg higher immediately after such a powerful rally.

Geopolitics has also crept back into the conversation. The mood around US-Iran negotiations remains cautiously optimistic, with reports suggesting both sides are closer to a framework agreement than at any point since the conflict began. However, significant sticking points remain, particularly around uranium enrichment and the future governance of the Strait of Hormuz. Markets are therefore caught between two narratives: the expectation that a deal will eventually emerge and the reality that negotiations remain fragile. That uncertainty has helped support oil and gold in recent sessions, even as the broader risk backdrop remains relatively constructive.

Past performance is not a reliable indicator of future results.hello

The next major test comes this afternoon with the US jobs report. Under normal circumstances, payrolls data would be the dominant market driver. However, with sentiment already looking a little shaky and investors sitting on substantial gains, the reaction function may be more nuanced. A strong report would reinforce the view that the US economy remains resilient, but it could also revive concerns that the Federal Reserve will need to keep rates restrictive for longer. A weaker report, meanwhile, could support the case for eventual policy easing but raise questions about whether growth is beginning to slow. In other words, the labour market data has the potential to matter more than usual because markets are no longer moving on pure optimism, they are increasingly looking for confirmation that the fundamental backdrop can continue to justify current valuations.

For now, the broader trend remains positive. Earnings growth is still exceptionally strong, AI investment continues to support corporate profitability and hopes of a diplomatic resolution in the Middle East remain intact. But after such a powerful rally, markets appear to be entering a phase where good news is no longer enough on its own. Investors are becoming more selective, and that suggests volatility could remain elevated as we head deeper into the summer.

Past performance is not a reliable indicator of future results.