It’s Only Money
Market Highlights
“You have to go on and be crazy. Craziness is like heaven.” – Jimi Hendrix
It appears the craziness is endless. Being whipsawed by ever-changing news is exhausting, especially if you’re waiting for a signal that all is clear. This is where having a steady philosophy and a clear reason for holding the positions you hold becomes important. Staying the course amidst the noise and confusion becomes critical. Joe and I are always available to discuss any concerns you may have and how they relate to your personal situation.
Two looming questions that still dominate the headlines are: 1) When will the Strait of Hormuz open? 2) Are oil prices a temporary inflation event, or the cause of a recession?
When does oil go from a bottleneck problem to a stock problem? For now, the oil is there to be had. If reserves run dry and the oil remains inaccessible, it could become septic to the overall system—and that’s a stock concern. This is where we’ve seen wild gyrations in the market, though oil had settled in around $100. (I write this with an abundance of caution, as the price of oil may have changed significantly given the fluid situation in Iran.)
A few interesting points to note: both bond and gold prices have fallen since the beginning of the war—not exactly what has historically occurred when war breaks out. In this case, the inflation impact of oil could be driving bond yields up.
SIDE NOTE: It feels more like the unwind of a hedge fund trade betting on lower interest rates. Let’s say their managers strongly suggested they back out of their bond and gold positions.
Those are just two of the dominant questions—not to mention concerns around tariffs, AI job losses, and private credit (which was mildly covered in our last newsletter). Trying to get ahead of any of these issues, given their political and economic weight, is an impossible task. Unfortunately, ever since the Great Financial Crisis and The Big Short, being the prophet of the next crash seems to have become a fashionable pose for many talking heads.
As Tuesday night’s deadline proves, predictions are not a strategy. Economic numbers here in the U.S. look good, despite the Iran/oil situation. America’s long-term economy remains strong, thanks to solid employment and technological advances. The U.S. leads the world in energy, keeping domestic costs low while shipping record amounts of natural gas.
One of my friends may have coined the term “Fortress Trump.” This is where he locks down most of the Western Hemisphere and charges a fee to do business with the U.S. We could be witnessing a shift in the global economic model that has been in place since World War II. NATO is on its back foot, the Middle East may soon be under new management, and those who benefited from the 80-year-old model—and never expected the gravy train to end—aren’t going to go quietly.