Zeynel Balcı: Cautious Optimism Prevails in  Markets

Summary:

Despite an intense geopolitical and economic agenda, a cautious sense of optimism continues to dominate both domestic and global markets. Recent geopolitical shocks, including developments surrounding Venezuela and Iran, have had limited market impact so far, while equity markets maintain upward momentum. Investors remain focused on geopolitical risks, central bank policies, and upcoming credit rating decisions.

Despite a crowded geopolitical backdrop, financial markets have largely preserved a cautiously optimistic tone. While recent developments in Venezuela initially triggered market unease, their impact has remained limited. This resilience has been supported by a calmer-than-expected response from China and Russia, as well as signals of cooperation between the new Venezuelan leadership and the United States. President Donald Trump’s announcement that 30 million tons of Venezuelan oil are en route to the U.S. further reinforced this perception.

Market commentary has even floated the possibility of an implicit understanding between Washington, Moscow, and Beijing—reviving memories of unresolved flashpoints such as Ukraine and Taiwan and underscoring how geopolitical narratives continue to shape investor sentiment.

Equities strong, safe havens subdued

Equity markets continue to push higher, while traditional safe-haven assets such as gold and silver have seen only limited movement. Given Venezuela’s position as one of the world’s largest oil reserve holders, attention briefly shifted to energy prices. However, expectations that Venezuela would increase oil supply led to downward pressure on prices.

The broader oil market narrative remains one of weak demand and ample supply. While Iran-related risks have recently prompted a modest rebound in prices, the underlying fundamentals remain largely unchanged.

Iran moves back into focus

As Venezuela fades from the headlines, Iran has re-emerged as a key geopolitical risk. Protests initially driven by economic grievances have intensified, raising questions about regime stability. Analysts note that any potential U.S. intervention in Iran would be far less likely to elicit the restrained response seen in the Venezuelan case, particularly from Russia and China.

Iran remains one of the countries with the strongest anti-U.S. sentiment, and external pressure could consolidate domestic support around the regime. Like Venezuela, Iran is a major oil and natural gas producer, with China as a key buyer. This dynamic reinforces the view that current tensions should be interpreted within the broader framework of trade wars, tariffs, and strategic competition. Similar considerations are increasingly being applied to Greenland, where access to natural resources appears to outweigh security rhetoric.

Demand for safe havens likely to persist

Markets are expected to remain sensitive to geopolitical developments for some time. As a result, interest in safe-haven assets such as gold, silver, platinum, and palladium is likely to persist. Recent rebound buying following profit-taking in precious metals is widely attributed to heightened geopolitical risk. Copper is also increasingly being assessed within this defensive framework.

Equity markets, meanwhile, have absorbed profit-taking without significant damage to their upward trend. In the United States, however, major indices are testing key resistance levels, with more frequent pullbacks signaling fatigue. The U.S. dollar has strengthened, the euro has weakened, and U.S. Treasury yields have edged higher.

At present, the U.S. 10-year Treasury yield stands at 4.17%, the euro/dollar exchange rate at 1.1631, the dollar index at 98.13, gold at $4,509 per ounce, silver at $79.96, and Brent crude at $62.74 per barrel.

Fed policy in focus

Developments at the Federal Reserve remain central to market pricing. Expectations that the Fed will continue its rate-cutting cycle this year remain intact, though a shift following the expected change in Fed leadership in May is seen as more likely.

Stephen Miran, widely viewed as a leading candidate for the Fed chairmanship, has said he expects rate cuts totaling around 150 basis points, largely based on his inflation outlook.

In Europe, the picture is less clear. Although the euro zone has reached the European Central Bank’s 2% inflation target, expectations for rate hikes have reversed. Markets expect the European Central Bank to hold rates steady at its February meeting, while pricing a roughly 45% probability of rate cuts later in the year.

Istanbul stocks test new highs

Turkey’s equity market has started the year strongly, with the BIST 100 continuing to test new record levels and outperforming many global peers. This positive divergence follows a period last year when global markets rallied while Turkish equities lagged.

Lower-than-expected December inflation data have strengthened expectations for a rate cut at the Central Bank of the Republic of Turkey’s January 22 meeting. Markets are pricing in a cut of 100–150 basis points. As interest rates are seen as one of equities’ main competitors, lower rates are expected to boost demand for stocks.

Credit ratings and foreign inflows watched

Markets are also closely monitoring upcoming credit rating assessments by Fitch Ratings and Moody’s on January 23. Any upgrade to Turkey’s rating or outlook could further support market sentiment. Turkey’s sovereign CDS has fallen close to the 200 level, reflecting improving risk perception.

According to central bank data, foreign investors bought $102 million in Turkish equities and $288 million in bonds in the week ending January 2. Equity inflows have continued uninterrupted for five weeks, totaling $919 million. In recent weeks, foreign investors have shown a clear preference for equities over fixed income.

Technical outlook: rally intact

With the BIST 100 surpassing the 11,605 level, the upward trend has gained momentum. The 12,000 level is seen as initial support, followed by 11,700–11,600. On the upside, resistance is located at 12,300–12,350, where profit-taking may emerge. Further resistance is seen around 13,000–13,100.

While pullbacks near resistance levels are considered natural, the broader uptrend remains intact, with no clear signs of investor “fear of heights” yet emerging.