The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Almost official.
The US/Iran deal, details pending, seems to be almost set. Markets were happy to learn that the Strait of Hormuz would open this week and that the US/Iran deal was essentially in place. All the usual caveats remain in place and the market could always get fooled again if something goes badly at this 11th hour but at the moment, expectations are that the US/Iran war, and all the negative economic consequences, is a wrap. The S&P opened up about 100 points and drifted a bit higher over the day. Yields fell a bit and crude fell significantly. The Dollar weakened small while precious metals rallied a lot. Bitcoin zoomed higher. The typical peace-is-coming trades all proceeded accordingly.
If the US/Iran situation is truly behind us, we look ahead to the usual economic and fundamental factors that matter. Wednesday is the next FOMC decision. This is the first meeting, decision, and communication under the new Fed Chairman, Kevin Warsh. No policy changes are expected. The end of the US/Iran war will also take the pressure off of inflation and therefore the calls to hike rates. The market will not be expecting anything from the Fed but it will be scrutinizing this first meeting and Chairman Warsh. Markets have tended to test the Fed in the initial months of a new Chairman.
I’m not sure what the market will be trying to test. It *appears* that the economic situation has just improved itself. The Fed doesn’t seem to be in a policy corner or a difficult predicament. Maybe something changes in the short term but if it doesn’t, I’m not sure how the market will evaluate the new Fed. I presume that as long as the Fed doesn’t surprise the market with its statement or press conference, markets will smoothly continue going about their business. We shall see Wednesday afternoon.
Until then, things *should* be quiet, with maybe a bit of continuation. If the bull market is back in motion, the next helpful impulse comes from the Fed. Or maybe the next unhelpful obstacle.
See you tomorrow.
-Mike
Visdom Market Commentary
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