It’s Only Money

When Bad News Isn't Enough

Back in February and March, many investors expected the conflict involving Iran and the Strait of Hormuz to send oil prices soaring. It seemed like a simple equation: geopolitical risk equals higher energy prices. Checking the gas prices, we move quickly up on bad news and gradually down on good news.

But markets are rarely that simple.

Despite one of the world's most important shipping lanes facing disruption, oil prices never reached the levels many predicted. Most pundits were calling for oil at $200 to $250 a barrel, but we never even got close. Why?

Part of the answer appears to be demand. China's economy has been slowing, reducing its appetite for crude oil. At the same time, investors have grown increasingly concerned about global economic growth. When businesses and consumers use less energy, higher prices become more difficult to sustain.

This is an important reminder that markets don't react only to supply. They constantly balance supply and demand.

The same principle applies to interest rates.

Lower inflation and slower economic growth could eventually create room for the Federal Reserve to reduce interest rates. Lower borrowing costs generally help consumers, businesses, and housing. However, policymakers are walking a narrow path. Cut rates too early, and inflation could reaccelerate. Wait too long, and economic growth could weaken unnecessarily.

It's an environment that rewards patience rather than prediction. Raising rates due to an oil supply issue is a recipe for disaster. The administration wants lower rates. The Treasury and the Fed seem to be coordinating on the same goal. Given the amount of debt supporting the AI buildout, refinancing into lower rates would be attractive for the overall economy.

Investing has always been about navigating uncertainty, not eliminating it. Headlines change daily. Sound financial planning should not.

Our job isn't to guess tomorrow's news. It's to build portfolios that can weather whatever tomorrow brings.