The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
US/Iran
Headlines regarding the Strait of Hormuz and the US/Iran ceasefire were confusing, contradictory, and disappointing. The typical war-is-worsening capital markets reaction ensued. US stocks weakened, crude climbed, yields climbed, the Dollar strengthened, precious metals dropped. The notable outlier was Bitcoin, which rallied significantly. The markets are handling the non-progress, potential backtracking, of the US/Iran situation well. Nobody panicked. The situation still takes its toll on markets though. The Strait of Hormuz remains effectively closed.
Markets wait patiently for a true peace agreement between the US and Iran and a resumption of traffic through the Strait. It appears that continued delays in the resolution of the situation are not as catastrophic as once feared. Certainly the upward pressure in crude is a negative but it sure looks and feels like markets are adjusting. The worry that high oil prices, for an extended period, would seriously dent the global economy… is fading away. Calamity will likely be avoided. Oil prices will climb, alternate supply will emerge, and demand will reduce.
This is an interesting shift in perception. The US/Iran situation no longer looks like an economic game of chicken. It looks like a large but manageable disruption, which is a headache for all, but something that can/will be accommodated. And that’s if it persists for a longer time. If the disruption ends, we should quickly return to business as usual.
Are markets no longer deathly frightened of a continuation of the US/Iran conflict? I think so. This is a significantly positive development. A crash fear, or a recession-triggered bear market, would therefore be off the table. That’s notable. That’s also great news for all the dip-buyers.
See you tomorrow.
-Mike
Visdom Market Commentary
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