The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Hope?
Risk off was in motion this morning. Overseas markets lost 2-3% overnight and worry was the emotion of the moment. Crude oil was higher, as were Treasury yields. The S&P opened down about 60 points and traded in the down 35 to down 65 point range until late in the session. Israel’s Prime Minister stated the Iran lost its ability to manufacture missiles and that Israel would assist the US in opening the Strait of Hormuz. Markets reacted immediately. The S&P went positive briefly, yields dropped across the curve, the Dollar weakened. In the final hour, some of the Israel-inspired price action reversed but the net effect was risk-on.
It doesn’t seem like the world changed much today. We caught a glimpse of how markets will react if/when people think that the Strait of Hormuz will open. Prime Minister Netanyahu also stated that the war will end faster than people think. This emphasizes the time component of the Iran war yet again. The markets expect a return to normalcy. They are counting on it. They are holding on in the hope that the disruption won’t last much longer.
The problem is that nobody knows how much time that gives markets. Is it a week? Almost surely. Is it a month? That sounds a bit of a stretch. Where is the tipping point in there? Non-progress w/r/t the Strait of Hormuz is a risk-off force. The risk-on trades need to get tidbits of hope or actual news of progress now.
Will we get something like that tomorrow, or over the weekend? I would think so but most investors think not.
See you Monday, have a great weekend.
-Mike
Visdom Market Commentary
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