So, another trading week ends and it’s been a week full expected and unexpected developments.

The Federal Reserve raised interest rates for the first time since 2023, AI fears rattled technology stocks, and just when investors thought they had enough geopolitical and trade headlines to keep them busy, another one has started developing between Washington, Ottawa and Brussels.

Perhaps the market deserves a quiet weekend.

Unfortunately, markets don’t do quiet weekends.

Let’s start with the Fed.

The quarter-point rate increase takes the federal funds target range to 3.75%–4%, with inflation still above the central bank’s 2% target.

The Fed has also left the door open to another increase later this year.

For markets, the important part isn’t simply that rates went up.

It’s what higher rates mean for everything else.

Money becomes more expensive, valuations come under pressure, and investors have to reconsider just how much they are willing to pay today for growth that may not arrive until tomorrow.

Which brings us rather neatly to AI.

The technology revolution hasn’t disappeared. But the sheer scale of investment has started to make investors nervous.

The major technology companies are expected to spend hundreds of billions of dollars this year building the infrastructure required for AI, with spending expected to rise even further next year.

And now we’re seeing something rather interesting.

The fear isn’t necessarily that AI won’t work.

The fear is that concerns about its risks, development and regulation could slow the investment needed to keep building it.

That creates an awkward little paradox.

The world is worried that we’re investing too much in AI.

But if that fear becomes strong enough to stop companies investing, we could end up worrying that we’re not investing enough.

Markets, as ever, have found a way to make the simple complicated.

And then there is Canada.

Canada is looking to strengthen its relationship with the European Union, with the possibility of an unprecedented associate-membership arrangement being discussed. President Trump has responded by warning that if he sees the move as hostile, the US could impose heavy tariffs on Europe.

At first glance, that might look like another political story.

But markets don’t really care whether a headline begins in a parliament, a boardroom or a presidential press conference.

They care about what happens to trade, costs, supply chains and economic growth.

And suddenly we have another potential source of uncertainty.

Higher interest rates.

Questions over the future pace of AI investment.

And another possible trade dispute developing between some of the world’s biggest economies.

None of these stories necessarily spells disaster.

But together, they tell us something important.

The market is becoming increasingly sensitive to uncertainty.

Investors have spent the last few years embracing growth, technology and the promise of an AI-led future.

Now they’re being reminded that the road to that future still has a few rather large potholes.

And perhaps that’s the real story beneath this week’s headlines.

Not that the market has suddenly turned against AI.

Not that one interest-rate increase has changed everything.

And not that a disagreement between Washington, Canada and Brussels will automatically become a trade war.

It’s that investors are beginning to realise there are rather more moving parts than they might have hoped.

And when markets have too many moving parts, they tend to do what markets do best.

They start asking questions.

Sometimes quite loudly.

So perhaps next week we’ll get some answers.

Although, knowing the markets, they’ll probably just give us three more questions instead.

Anyway, till next week, all of you trade safe.

By James Trescothick
Head of Market Research and Market Analysis

Risk Disclaimer: This information is for educational purposes only and does not constitute investment advice. Financial markets involve risks, and past performance is not indicative of future results. Always conduct your own research and seek professional advice before making investment decisions.